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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-K
 
 
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal period ended December 31, 2021
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                
to
Commission File Number:
001-40190
 
 
Revolution Healthcare Acquisition Corp.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
86-1403778
(State or other jurisdiction
of incorporation or organization)
 
(I.R.S. Employer
Identification Number)
 
20 University Road
Cambridge Massachusetts
(Address of principal executive offices)
  
02138
(Zip Code)
Registrant’s telephone number, including area code:
617-234-7000
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
  
Trading Symbol(s)
  
Name of each exchange on which registered
SAIL
SM
(Stakeholder Aligned Initial Listing) securities, each consisting of one share of Class A common Stock, $0.0001 par value
, and
one-fifth
of one redeemable warrant to acquire one share of Class A Common Stock
  
REVHU
  
The Nasdaq Stock Market LLC
     
Class A Common Stock included as part of the SAIL
SM
securities
  
REVH
  
The Nasdaq Stock Market LLC
     
Redeemable Warrants included as part of the SAIL
SM
securities, each whole warrant exercisable for one share of Class A Common Stock
at an exercise price of $11.50
  
REVHW
  
The Nasdaq Stock Market LLC
 
 
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  ☐    No  ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer, “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer      Accelerated filer  
Non-accelerated filer
     Smaller reporting company  
         Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes      No  ☐
Based on the closing price of $9.82 per share on June 30, 2021, the aggregate market value of our voting and non-voting common stock held by non-affiliates was $
540,100,000.
As of March 17, 2022, 55,000,000 shares of Class A common stock, par value $0.0001 per share, and 2,750,000 shares of Class B common stock, par value $0.0001 per share, were issued and outstanding.
 
 
 

TABLE OF CONTENTS
 
 
 
 
  
PAGE
 
 
 
  
     
Item 1.
 
  
 
11
 
Item 1A.
 
  
 
40
 
Item 1B.
 
  
 
81
 
Item 2.
 
  
 
81
 
Item 3.
 
  
 
81
 
Item 4.
 
  
 
81
 
   
  
     
Item 5.
 
  
 
82
 
Item 6.
 
  
 
82
 
Item 7.
 
  
 
83
 
Item 7A.
 
  
 
88
 
Item 8.
 
  
 
88
 
Item 9.
 
  
 
88
 
Item 9A.
 
  
 
88
 
Item 9B.
 
  
 
89
 
Item 9C.
 
  
 
89
 
   
  
     
Item 10.
 
  
 
90
 
Item 11.
 
  
 
100
 
Item 12.
 
  
 
101
 
Item 13.
 
  
 
104
 
Item 14.
 
  
 
106
 
   
  
     
Item 15.
 
  
 
108
 
Item 16.
 
  
 
109
 
  
     
  
 
110
 
 
i

Table of Contents

CERTAIN TERMS
Unless otherwise stated in this Annual Report on Form
10-K
or the context otherwise requires, references to:
 
   
“Alignment Shares” are to our Class B shares issued to our sponsor and the foundation;
 
   
“amended and restated certificate of incorporation” are to the amended and restated certificate of incorporation that the company adopted prior to the consummation of the Initial Public Offering;
 
   
“ARCH” are to ARCH Venture Management, LLC, a Delaware limited liability company, or to ARCH Venture Fund XI, L.P., a Delaware limited partnership, as applicable;
 
   
“Board” or “board of directors” are to our board of directors;
 
   
“Class A shares” or “shares of Class A common stock” are to our shares of Class A common stock, par value $0.0001 per share;
 
   
“Class B shares” or “shares of Class B common stock” are to our shares of Class B common stock, par value $0.0001 per share;
 
   
“common stock” are to our Class A common stock and our Class B common stock;
 
   
“directors” are to our current directors and director nominees;
 
   
“equity-linked securities” are to any debt or equity securities that are convertible, exercisable or exchangeable for shares of our Class A common stock issued in a financing transaction in connection with our Initial Business Combination, including, but not limited to, a private placement of such securities;
 
   
“Foundation” are to Health Assurance Economy Foundation, a Delaware nonprofit nonstock corporation;
 
   
“General Catalyst” are to General Catalyst Partners, LLC, a Delaware limited liability company;
 
   
“Initial Stockholders” are to our sponsor, the foundation and any other holders of our alignment shares immediately prior to the Initial Public Offering;
 
   
“Initial Public Offering” are to the Company’s offering on March 22, 2021 of 55,000,000 Stakeholder Aligned Initial Listing securities, or SAIL
SM
securities (each, a “SAIL”, and collectively, “SAILs”), including 5,000,000 SAILs as a result of the underwriters’ exercise in part of their over-allotment option, sold at an offering price of $10.00 per SAIL;
 
   
“Initial Public Offering Final Prospectus” are to the final prospectus to the company’s Initial Public Offering filed with the SEC on March 18, 2021;
 
   
“Letter Agreement” are to the letter agreement, dated March 17, 2021, among the company, the sponsor, the foundation and each executive officer and director of the company, pursuant to which the sponsor and each executive officer and director of the company has agreed to vote any shares of Class A common stock held by him, her or it in favor of the company’s Initial Business Combination; to facilitate the liquidation and winding up of the company if an Initial Business Combination is not consummated within 24 months; to certain transfer restrictions with respect to the company’s securities; to certain indemnification obligations of the sponsor; and the company has agreed not to enter into a definitive agreement regarding an Initial Business Combination without the prior consent of the sponsor;
 
   
“management” or our “management team” are to our executive officers;
 
   
“Private Placement Warrants” are to the warrants issued to our sponsor in a private placement simultaneously with the closing of the Initial Public Offering and upon conversion of working capital loans, if any, which private placement warrants are identical to the warrants sold in the Initial Public Offering, subject to certain limited exceptions as described in the initial public offering final prospectus;
 
   
“Public Shares” are to our shares of Class A common stock sold as part of the SAIL
SM
securities in the Initial Public Offering (whether they are purchased in the Initial Public Offering or thereafter in the open market);
 
1

Table of Contents
   
“Public Stockholders” are to the holders of our public shares, including our initial stockholders and management team to the extent our initial stockholders and/or members of our management team purchase public shares; provided that our initial stockholders’ and each member of our management team’s status as a “public stockholder” will only exist with respect to such public shares;
 
   
“Sponsor” are to REV Sponsor LLC, a Delaware limited liability company;
 
   
“Underwriter’s over-allotment option” are to the underwriter’s
45-day
option to purchase up to an additional 7,500,000 SAIL
SM
securities to cover over-allotments in the Initial Public Offering, which was partially exercised on March 22, 2021 resulting in the purchase of an additional 5,000,000 SAILs;
 
   
“Warrants” are to our warrants sold as part of the SAIL
SM
securities in the Initial Public Offering (whether they are purchased in the Initial Public Offering or thereafter in the open market); and
 
   
“we,” “us,” “our,” “REVH,” “RHAC,” “company” or “our company” are to Revolution Healthcare Acquisition Corp., a Delaware corporation.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this Annual Report on Form
10-K
may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’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 “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “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 Annual Report on Form
10-K
may include, for example, statements about:
 
   
our ability to select an appropriate target business or businesses;
 
   
our ability to complete our Initial Business Combination;
 
   
our expectations around the performance of a prospective target business or businesses;
 
   
our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our Initial Business Combination;
 
   
our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our Initial Business Combination;
 
   
our potential ability to obtain additional financing to complete our Initial Business Combination;
 
   
our pool of prospective target businesses;
 
   
our ability to consummate an initial business combination due to the uncertainty resulting from the
COVID-19
pandemic, including new variant strains of the underlying virus, current or anticipated military conflict, including between Russia and Ukraine, terrorism, sanctions, rising energy prices, inflation and interest rates and other geopolitical events globally;
 
   
the ability of our officers and directors to generate a number of potential business combination opportunities;
 
   
our public securities’ potential liquidity and trading;
 
   
the lack of a market for our securities;
 
2

Table of Contents
   
the use of proceeds not held in the Trust Account or available to us from interest income on the Trust Account balance;
 
   
the Trust Account not being subject to claims of third parties; or
 
   
our financial performance following our Initial Public Offering.
The forward-looking statements contained in this Annual Report on Form
10-K
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 “Item 1A. 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.
 
3

Table of Contents
SUMMARY OF THE MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS
An investment in our securities involves a high degree of risk. You should consider carefully all of the risks described below, together with the other information contained in this Annual Report on Form
10-K,
before making a decision to invest in our SAIL
SM
securities. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. Such risks include, but are not limited to:
 
   
We are a blank check company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.
 
   
Past performance by our management team or their respective affiliates may not be indicative of future performance of an investment in us.
 
   
Certain of our directors and officers are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
 
   
Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by current or anticipated military conflict, including between Russia and Ukraine, terrorism, sanctions or other geopolitical events globally, the COVID 19 coronavirus pandemic, including new variant strains of the underlying virus, and the status of debt and equity markets.
 
   
The requirement that 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 any taxes payable) may limit the type and number of companies with which we may complete such a business combination.
 
   
Our stockholders may not be afforded an opportunity to vote on our proposed Initial Business Combination, which means we may complete our Initial Business Combination even though a majority of our stockholders do not support such a combination.
 
   
Your only opportunity to affect the investment decision regarding a potential business combination may be limited to the exercise of your right to redeem your shares from us for cash.
 
   
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.
 
   
The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into a business combination with a target.
 
   
The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure.
 
   
The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our Initial Business Combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your shares..
 
   
The requirement that we consummate an Initial Business Combination within 24 months after the closing of our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class) may give potential target businesses leverage over us in negotiating a business combination and may limit the time we have in which to conduct due diligence on potential business
 
4

Table of Contents
 
combination targets, in particular as we approach our dissolution deadline, which could undermine our ability to complete our Initial Business Combination on terms that would produce value for our stockholders.
 
   
As the number of special purpose acquisition companies evaluating targets increases, attractive targets may become scarcer and there may be more competition for attractive targets. This could increase the cost of our Initial Business Combination and could even result in our inability to find a target or to consummate an Initial Business Combination.
 
   
We may not be able to consummate an Initial Business Combination within 24 months of our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class), in which case we would cease all operations except for the purpose of winding up and we would redeem our Public Shares and liquidate.
 
   
If we seek stockholder approval of our Initial Business Combination, our initial stockholders, directors, executive officers, advisors and their affiliates may elect to purchase Public Shares or warrants, which may influence a vote on a proposed business combination and reduce the public “float” of our shares of Class A common stock or Public Warrants.
 
   
If a stockholder fails to receive notice of our offer to redeem our Public Shares in connection with our Initial Business Combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.
 
   
You will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. Therefore, to liquidate your investment, you may be forced to sell your Public Shares or warrants, potentially at a loss.
 
   
Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
 
   
You will not be entitled to protections normally afforded to investors of many other blank check companies.
 
   
If we seek stockholder approval of our Initial Business Combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of stockholders are deemed to hold in excess of 15% of our shares of Class A common stock, you will lose the ability to redeem all such shares in excess of 15% of our shares of Class A common stock.
 
   
Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our Initial Business Combination. If we have not consummated our Initial Business Combination within the required time period, our public stockholders may receive only approximately $10.00 per public share, or less in certain circumstances, on the liquidation of our Trust Account and our warrants will expire worthless.
 
   
If the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants not being held in the Trust Account are insufficient to allow us to operate for the 24 months following the closing of the Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class), it could limit the amount available to fund our search for a target business or businesses and our ability to complete our Initial Business Combination, and we will depend on loans from our Sponsor, its affiliates or members of our management team to fund our search and to complete our Initial Business Combination.
 
   
Subsequent to completion of our Initial Business Combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and the price of our securities, which could cause you to lose some or all of your investment.
 
5

Table of Contents
   
If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the
per-share
redemption amount received by stockholders may be less than $10.00 per public share.
 
   
Our directors may decide not to enforce the indemnification obligations of our Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to our public stockholders.
 
   
The securities in which we invest the funds held in the Trust Account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the
per-share
redemption amount received by public stockholders may be less than $10.00 per share.
 
   
We may not have sufficient funds to satisfy indemnification claims of our directors and executive officers.
 
   
If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of our board of directors may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our board of directors and us to claims of punitive damages.
 
   
If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the
per-share
amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
 
   
If 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.
 
   
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.
 
   
If we have not consummated an Initial Business Combination within 24 months from the closing of the Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class), our public stockholders may be forced to wait beyond such period before redemption from our Trust Account.
 
   
Our stockholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.
 
   
You will not be permitted to exercise your warrants unless we register and qualify the underlying shares of Class A common stock or certain exemptions are available.
 
   
You may only be able to exercise your Public Warrants on a “cashless basis” under certain circumstances, and if you do so, you will receive fewer shares of Class A common stock from such exercise than if you were to exercise such warrants for cash.
 
   
The grant of registration rights to our initial stockholders and holders of our Private Placement Warrants may make it more difficult to complete our Initial Business Combination, and the future exercise of such rights may adversely affect the market price of our shares of Class A common stock.
 
   
Because we are neither limited to evaluating a target business in a particular industry sector nor have we selected any specific target businesses with which to pursue our Initial Business Combination, you will be unable to ascertain the merits or risks of any particular target business’s operations.
 
   
We may seek acquisition opportunities in industries or sectors which may or may not be outside of our management’s area of expertise.
 
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Although we have identified general criteria and guidelines that we believe are important in evaluating prospective target businesses, we may enter into our Initial Business Combination with a target that does not meet such criteria and guidelines, and as a result, the target business with which we enter into our Initial Business Combination may not have attributes entirely consistent with our general criteria and guidelines.
 
   
We are not required to obtain an opinion from an independent accounting or investment banking firm, and consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to our stockholders from a financial point of view.
 
   
We may issue additional shares of Class A common stock or preferred stock to complete our Initial Business Combination or under an employee incentive plan after completion of our Initial Business Combination. Any such issuances would dilute the interest of our stockholders and likely present other risks.
 
   
Subsequent to the completion of our Initial Business Combination, our Alignment Shares will be eligible for conversion into shares of our Class A common stock based on the Total Return of our outstanding equity capital. Any such issuance would dilute the interest of our stockholders and likely present other risks.
 
   
Resources could be wasted in researching Initial Business Combinations that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we do not complete our Initial Business Combination, our public stockholders may only receive their pro rata portion of the funds in the Trust Account that are available for distribution to public stockholders, and our warrants will expire worthless..
 
   
We are dependent upon our executive officers and directors and their loss could adversely affect our ability to operate.
 
   
Our ability to successfully effect our Initial Business Combination and to be successful thereafter will be totally dependent upon the efforts of our key personnel, some of whom may join us following our Initial Business Combination. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
 
   
Our key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business combination, and a particular business combination may be conditioned on the retention or resignation of such key personnel. These agreements may provide for them to receive compensation following our Initial 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.
 
   
We may have a limited ability to assess the management of a prospective target business and, as a result, may affect our Initial Business Combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company.
 
   
The officers and directors of an acquisition candidate may resign upon completion of our Initial Business Combination. The loss of a business combination target’s key personnel could negatively impact the operations and profitability of our post-combination business.
 
   
Our executive officers and directors will allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to complete our Initial Business Combination.
 
   
Our officers and directors presently have, and any of them in the future may have, additional, fiduciary or contractual obligations to other entities, including other blank check companies or special purpose acquisition companies, including HAAC and CPAR, and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
 
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Involvement of members of our management and companies with which they are affiliated in civil disputes and litigation, governmental investigations or negative publicity unrelated to our business affairs could materially impact our ability to consummate an Initial Business Combination.
 
   
Our executive officers, directors, security holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests.
 
   
We may engage in a business combination with one or more target businesses that have relationships with entities that may be affiliated with our Sponsor, executive officers, directors or initial stockholders which may raise potential conflicts of interest.
 
   
A conflict of interest may arise from the need to obtain the consent of ARCH and General Catalyst, which own a significant interest in our sponsor, to our business combination.
 
   
Since our initial stockholders will lose their entire investment in us if our Initial Business Combination is not completed (other than with respect to Public Shares they may acquire during or after the Initial Public Offering), a conflict of interest may arise in determining whether a particular business combination target is appropriate for our Initial Business Combination.
 
   
We may issue notes or other debt securities, or otherwise incur substantial debt, to complete a business combination, which may adversely affect our leverage and financial condition and thus negatively impact the value of our stockholders’ investment in us.
 
   
We may only be able to complete one business combination with the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, which will cause us to be solely dependent on a single business which may have a limited number of products or services. This lack of diversification may negatively impact our operations and profitability..
 
   
We may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to complete our Initial Business Combination and give rise to increased costs and risks that could negatively impact our operations and profitability.
 
   
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.
 
   
Our management may not be able to maintain control of a target business after our Initial Business Combination. Upon the loss of control of a target business, new management may not possess the skills, qualifications or abilities necessary to profitably operate such business.
 
   
We may seek business combination opportunities with a high degree of complexity that require significant operational improvements, which could delay or prevent us from achieving our desired results.
 
   
We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete our Initial Business Combination with which a substantial majority of our stockholders do not agree.
 
   
In order to effectuate an Initial Business Combination, blank check companies have, in the recent past, amended various provisions of their charters and other governing instruments, including their warrant agreements. We cannot assure you that we will not seek to amend our amended and restated certificate of incorporation or governing instruments in a manner that will make it easier for us to complete our Initial Business Combination that our stockholders may not support.
 
   
The provisions of our amended and restated certificate of incorporation that relate to
our pre-business combination
activity (and corresponding provisions of the agreement governing the release of funds from our Trust Account) may be amended with the approval of holders of at least 65% of our common stock, which is a lower amendment threshold than that of some other blank check companies. It may be easier for us, therefore, to amend our amended and restated certificate of
 
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incorporation to facilitate the completion of an Initial Business Combination that some of our stockholders may not support.
 
   
Certain agreements related to the Initial Public Offering may be amended without stockholder approval.
 
   
We may be unable to obtain additional financing to complete our Initial Business Combination or to fund the operations and growth of a target business, which could compel us to restructure or abandon a particular business combination. If we do not complete our Initial Business Combination, our public stockholders may only receive their pro rata portion of the funds in the Trust Account that are available for distribution to public stockholders, and our warrants will expire worthless.
 
   
Our initial stockholders control a substantial interest in us and thus may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support.
 
   
Our initial stockholders contributed $25,000, or approximately $0.001 per Alignment share, and, accordingly, holders of our Class A common stock have experienced substantial dilution and may experience further substantial dilution.
 
   
We may amend the terms of the warrants in a manner that may be adverse to holders of Public Warrants. As a result, the exercise price of your warrants could be increased, the exercise period could be shortened and the number of shares of Class A common stock purchasable upon exercise of a warrant could be decreased, all without your approval.
 
   
We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
 
   
Our warrants may have an adverse effect on the market price of our shares of Class A common stock and make it more difficult to effectuate our Initial Business Combination.
 
   
Because each SAIL
SM
security contains
one-fifth
of one redeemable warrant and only a whole warrant may be exercised, the SAIL
SM
securities may be worth less than units of other blank check companies.
 
   
A provision of our warrant agreement may make it more difficult for us to consummate an Initial Business Combination.
 
   
The determination of the offering price of our SAIL
SM
securities and the size of the Initial Public Offering was more arbitrary than the pricing of securities and size of an offering of an operating company in a particular industry. You may have less assurance, therefore, that the offering price of our SAIL
SM
securities properly reflects the value of such SAIL
SM
 securities than you would have in a typical offering of an operating company.
 
   
Because we must furnish our stockholders with target business financial statements, we may lose the ability to complete an otherwise advantageous Initial Business Combination with some prospective target businesses.
 
   
We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to “emerging growth companies” or “smaller reporting companies,” this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
 
   
Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate a business combination, require substantial financial and management resources, and increase the time and costs of completing an acquisition.
 
   
Provisions in our amended and restated certificate of incorporation may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our shares of Class A common stock and could entrench management.
 
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Provisions in our amended and restated certificate of incorporation and Delaware law may have the effect of discouraging lawsuits against our directors and officers.
 
   
Our warrant agreement designates the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of our warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with our company.
 
   
Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss.
 
   
Since only holders of our Alignment Shares will have the right to vote on the election of directors, Nasdaq may consider us to be a “controlled company” within the meaning of the Nasdaq rules and, as a result, we may qualify for exemptions from certain corporate governance requirements.
 
   
An investment in us may result in uncertain or adverse U.S. federal income tax consequences.
 
   
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 adversely affect us.
 
   
We are subject to changing law and regulations regarding regulatory matters, corporate governance and public disclosure that have increased both our costs and the risk of
non-compliance.
 
   
In our Quarterly Report on Form
10-Q
filed May 24, 2021, our Amendment No. 1 to Quarterly Report on Form
10-Q
filed January 13, 2022 and this Annual Report on Form
10-K,
we reached determinations to restate certain previously issued financial statements to correct the accounting treatment for the Company’s securities.
 
   
We identified a material weakness in our internal control over financial reporting. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
 
   
We may face litigation and other risks as a result of the material weakness in our internal control over financial reporting.
 
   
The other risks and uncertainties discussed in “Risk Factors” and elsewhere in this Annual Report on Form
10-K.
 
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PART I
 
Item 1.
Business
Overview
We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more businesses, which we refer to throughout this Annual Report on Form
10-K
as our Initial Business Combination. Our mission is to partner with leading businesses at the intersection of health care, life sciences and technology to redesign health care around the patient. To date, our efforts have been limited to organizational activities as well as activities related to the Initial Public Offering. We have not selected any business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. We have generated no operating revenues to date, and we do not expect that we will generate operating revenues until we consummate our Initial Business Combination.
Initial Public Offering
On March 22, 2021, we consummated the Initial Public Offering of 55,000,000 Stakeholder Aligned Initial Listing securities, or SAIL
SM
securities (each, a “SAIL”, and collectively, “SAILs”), including 5,000,000 SAILs as a result of the underwriters’ exercise in part of their over-allotment option. The SAILs were sold at an offering price of $10.00 per SAIL, generating gross proceeds of $550.0 million, and incurring offering costs of approximately $31.0 million, of which approximately $19.3 million was for deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 12,000,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant with our Sponsor, generating gross proceeds of $18.0 million.
Upon the closing of the Initial Public Offering and the Private Placement, $550.0 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement were placed in a trust account (“Trust Account”) located in the United States, with Continental Stock Transfer & Trust Company acting as trustee, and were invested only in U.S. “government securities,” within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in money market funds meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule
2a-7
under the Investment Company Act, which invest only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of an Initial Business Combination and (ii) the distribution of the Trust Account as described below.
Our Team
Our management team is led by Jay Markowitz as CEO and Director; Jeff Leiden as Chairman; Hemant Taneja as director; Robert Nelsen as director; Catherine Friedman as director; Jennifer Schneider as director; Kris Engskov as director; Jason Doren as CAO; Mark McDonnell as CFO; and Paul Fielding as COO.
The team has entrenched relationships with one another, as well as a broad network within the health care, life sciences and technology industries. They are united by the common goal of redefining health care to be focused on the patient for the benefit of all stakeholders.
Jay Markowitz, M.D.
Dr. Jay Markowitz has spent 18 years studying and practicing science and medicine, and 19 years analyzing, investing and working in the biopharmaceutical industry. He is currently a Senior Partner at ARCH, joining the
 
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firm in 2021. In 2020, he was a Vice President and Sector Portfolio Manager at T. Rowe Price, and a Senior Vice President at Regeneron Pharmaceuticals from 2017-2020. He was the U.S. pharmaceutical and biotechnology analyst at Capital World Investors from 2010-2017. Dr. Markowitz will work closely with other scientific and development leaders on portfolio evaluation and decision making as well as assessing external opportunities. Prior to Capital World Investors, Dr. Markowitz was a biotechnology analyst with investment responsibility at T. Rowe Price from 2002-2010. Before transitioning to an investment career, he was an assistant professor and transplant surgeon at the Johns Hopkins University School of Medicine (1999-2002) and University of Medicine and Dentistry of New Jersey (1997-1999). Dr. Markowitz received his B.A. from Columbia University and his M.D. from Duke University. He completed a fellowship in transplant surgery at the UCLA Medical Center, a surgical residency at Massachusetts General Hospital, and a Research Fellowship in Cellular and Molecular Immunology at the Harvard School of Public Health.
Jeff Leiden, M.D., Ph.D.
Dr. Jeff Leiden is the Executive Chairman of Vertex Pharmaceuticals. He received his B.A., M.D. and Ph.D. degrees with honors from the University of Chicago. He is a physician and scientist who, for the last 40 years, has dedicated his career to improving the lives of people with serious diseases. His experience spans all aspects of the biotech and pharmaceutical industries.
He began his career in academia as a molecular biologist and practicing cardiologist. From 1987 to 2000, Dr. Leiden held several academic and hospital appointments, including roles as Chief of Cardiology, the Rawson Professor of Medicine and Pathology, and an Attending Physician at the University of Chicago; the Elkan R. Blout Professor of Biological Sciences at the Harvard School of Public Health; and Professor of Medicine at Harvard Medical School. Dr. Leiden was named a Crain’s Chicago Business 40 Under 40 in 1994. He is an elected member of the National Academy of Medicine and the American Association of Arts and Sciences. During his academic career, he was also involved in starting several biotechnology companies including Vical and Cardiogene. From 2000 to 2006, he served as President and Chief Operating Officer and Chief Scientific Officer at Abbott Laboratories where he had responsibility for running Abbott’s global pharmaceuticals business. While at Abbott, Dr. Leiden led the development and launch of multiple breakthrough medicines, including HUMIRA
®
(adalimumab) for rheumatoid arthritis and other autoimmune diseases and KALETRA
®
(lopinavir/ritonavir) for HIV infection. He also held a number of industry board positions, including as a director of Abbott Laboratories and TAP,
non-executive
Vice Chairman of Shire Pharmaceuticals Plc and director of Millennium Pharmaceuticals, Inc. From 2006 to 2011, he was a Managing Director of Clarus Ventures, a life sciences venture capital firm. There he was dedicated to developing new treatments through the creation of innovative biotech companies.
Dr. Leiden has served as a member of Vertex’s board of directors since 2009 and was Chairman, President and CEO from 2012 to 2020. Under his leadership, Vertex developed and commercialized four precision medicines to treat the underlying cause of cystic fibrosis. In collaboration with CRISPR Therapeutics, Vertex also developed the first human gene editing therapy for a human genetic disease,
CTX-001,
a functional cure for Sickle Cell disease and B thalassemia. During his eight-year tenure as CEO of Vertex, its market cap increased from approximately $8.6 billion to more than $63.3 billion. Dr. Leiden also cares deeply about inspiring and equipping under-resourced students and young women to become the next generation of scientific leaders. He established a signature program at Vertex to enhance science, technology, engineering, art and math (STEAM) education among students in our local communities, including an
on-site
learning lab, mentorship programs, internships and college scholarships. In 2017, Vertex announced a sustained corporate giving commitment of $500 million over the next 10 years, of which $50 million is focused on STEAM education.
In addition to his current responsibilities at Vertex, Dr. Leiden is a director of the Massachusetts Mutual Life Insurance Company, Chairman of the Board of two private healthcare companies, Tmunity and Casana Health, chair of the Scientific Advisory Board of the Brigham and Women’s Hospital and a member of the Scientific Advisory Board of Boston Children’s Hospital. Dr. Leiden is also Chairman of the Massachusetts
 
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Competitive Partnership and serves on the board of fellows of Harvard Medical School, and as
co-chair
of Massachusetts Governor Charlie Baker’s STEM Advisory Council and Digital Health Council. He is a Trustee of the Boston Symphony Orchestra, a Fellow of the American Academy of Arts and Sciences and an elected member of the National Academy of Medicine, the American Society of Clinical Investigation and the American Association of Physicians.
Hemant Taneja
Hemant Taneja is the Managing Partner of General Catalyst, which he joined in 2007, and the founder of the firm’s Silicon Valley operations. Mr. Taneja partners with mission-driven founders building platform companies that are fundamentally aligned with the long-term interests of society. Mr. Taneja is an early investor in market-leading companies across many sectors of the economy like Anduril, Canva, Color, Gitlab, Grammarly, Gusto, Livongo, Ro, Samsara, Snap, and Stripe. Mr. Taneja also serves as chairman and chief executive officer of Health Assurance Acquisition Corp. (HAAC), a special purpose acquisition company sponsored by an affiliate of General Catalyst. Mr. Taneja’s primary investment thesis, known as “economies of unscale,” explores how
21st-century
founders leverage
AI-based
mass personalization techniques to innovate and build platforms across all sectors of the economy. In his 2018 book Unscaled, Mr. Taneja builds on that thesis and articulates the need for accountability, transparency, and explainability in artificial intelligence technologies as they permeate deeper into daily life. Mr. Taneja’s pieces in Harvard Business Review, “The Era of Move Fast and Break Things is Over,” and “Managing the Unintended Consequences of Your Innovations,” advocate for entrepreneurs and venture capitalists to adopt frameworks for responsible innovation and investing.
Mr. Taneja is also the founder and Executive Chairman of Commure, a company that has partnered with major health systems to modernize the software infrastructure for the health care space since its inception in 2017. Mr. Taneja’s recently published book UnHealthcare,
co-authored
with Dr. Stephen K. Klasko, lays out their thesis for how the health care system needs to transform into a “health assurance” system to bring consumerism, affordability, and rational economic behavior to this important sector. In addition to his investment work, Mr. Taneja is the
Co-Founder
of Advanced Energy Economy, an organization focused on transforming energy policy in America since 2011; and is a Founding Board Member of the Khan Lab School, a nonprofit
K-12
school dedicated to classroom innovation since 2014. Mr. Taneja sits on the Board of Fellows for the Stanford School of Medicine and teaches a course at the college on A.I., Entrepreneurship, and Society. More recently, Mr. Taneja was featured in Business insider’s “100 People Transforming Business” list.
Robert Nelsen
Robert Nelsen is a
co-founder
and a Managing Director of ARCH. He joined ARCH at its founding and played a significant role in the creation, early sourcing, financing and development of more than 100 companies, including over 30 which have reached valuations exceeding $1 billion. Mr. Nelsen is focused on generating new ideas for disruptive technologies or business models and partnering with founding management teams and entrepreneurs to execute on these visions by advancing novel platform technologies with the overarching goal of improving care and outcomes. Some of his notable early-stage investments include Illumina, Alnylam, Juno (sold to Celgene for $11 billion in 2018) and GRAIL (announced a sale to Illumina in 2020 for $8 billion plus a future revenue share). Other investments over the years have included prominent biotechnology and life sciences companies, such as Array BioPharma (sold to Pfizer for $11.4 billion), Receptos (sold to Celgene for $7.2 billion), Sage Therapeutics, Beam Therapeutics, Denali Therapeutics, Karuna Therapeutics, Lyell Immunopharma, Vir Biotechnology, Fate Therapeutics, Editas, Sana Biotechnology, deCODE Genetics, 10x Genomics and Semma Therapeutics (sold to Vertex for $1 billion).
Mr. Nelsen is also a director of Vir Bio, Sana Biotechnology, Lyell Immunopharma, Karuna, Denali Therapeutics, and serves as Chairman of Hua Medicine, among others. He previously served as a Trustee of the Fred Hutchinson Cancer Research Institute, the Institute for Systems Biology, and was a director of the National Venture Capital Association. Mr. Nelsen holds an M.B.A. from the University of Chicago and a B.S. from the University of Puget Sound with majors in Economics and Biology.
 
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Catherine Friedman
Catherine Friedman is a member of our board of directors. Ms. Friedman is a business executive with nearly 40 years of experience across finance, technology, and healthcare. She is an Executive Venture partner at GV, where she is a senior member of the investing team and advises the life sciences portfolio.
Ms. Friedman has spent 15 years on the boards of leading public and private life sciences and technology companies. She previously served as the chair of the board of directors of GRAIL, Inc. (acquired by Illumnia), and was an independent director at Vividion Therapeutics (acquired by Bayer). She is currently a member of the board of directors of Altaba Inc. (formerly Yahoo!), Radius Health, Inc., Seer, Inc., and Lyell Immunopharma Inc.
Earlier in her career, Ms. Friedman spent nearly
24-years
in an investment banking career with Morgan Stanley, including Managing Director, Head of West Coast Healthcare, and
Co-Head
of Morgan Stanley’s Biotechnology Practice. Additionally, Ms. Friedman serves as a foundation trustee for the University of California San Francisco and the Darden School Foundation at the University of Virginia. She holds a B.A. in Economics from Harvard University and an M.B.A. from The University of Virginia’s Darden School of Business.
Jennifer Schneider, M.D.
Dr. Jennifer Schneider was the President of Livongo Health from December 2018 until October 2020, where she was responsible for product, data science, engineering, marketing, clinical operations, and growth strategy. Dr. Schneider previously served as the company’s Chief Medical Officer from 2015 to 2018, where she led the company’s strategic clinical product vision, data science, clinical trials, and the organization’s certified diabetes educators and coaches. Dr. Schneider also serves as a director of HAAC, a special purpose acquisition company sponsored by an affiliate of General Catalyst. Dr. Schneider is the author of Decoding Health Signals:
Silicon Valley’s Consumer-First Approach to a New Era of Health
, which offers a guide to the depth of the chronic conditions problem facing the industry today and explores how companies are using big data analytics and artificial intelligence to reinvent care delivery for people with chronic conditions. Dr. Schneider was recently named to Modern Healthcare’s List of Top Clinical Executives.
Prior to Livongo, Dr. Schneider held several key leadership roles at Castlight from 2010 to 2015, most recently as Chief Medical Officer. Dr. Schneider also has held leadership roles as a health outcomes researcher and Chief Resident at Stanford University from 2005 to 2006, and she has practiced medicine as an attending physician at Stanford University, the VA Palo Alto Health Care System, and Kaiser Permanente. Dr. Schneider has an undergraduate degree from the College of the Holy Cross (1997), a Doctor of Medicine degree from Johns Hopkins School of Medicine (2002), and a Master of Science degree in Health Services Research from Stanford University (2010). Dr. Schneider completed her internal medicine residency at Stanford University Hospital.
Kris Engskov
Mr. Engskov is Chief Executive Officer of FHCC, Inc, a provider of senior-focused mental and behavioral care services, a role he has served in since founding the company in October of 2021. Just prior, Kris Engskov served as President of Aegis Living, one of the nation’s leading providers of assisted living, memory care and wellness services for seniors. Mr. Engskov joined Aegis Living in early 2019 and was responsible for leading all aspects of the company’s operations, marketing and sales, clinical care, finance, development and human resources.
Prior to joining Aegis, Mr. Engskov spent over 16 years at Starbucks Coffee Company (2002-2018) where he held multiple senior leadership roles including as President of the company’s flagship U.S. retail division and earlier as President of Starbucks Europe, Middle East and Africa (EMEA). While at Starbucks, Mr. Engskov developed deep experience and expertise leading the development and execution of a number of new product and digital innovations globally, establishing significant new growth partnerships both in the U.S. and Europe and
 
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scaling several successful new store concepts and formats. While in Europe, he led a rapid turnaround of the EMEA division that enabled the company to quickly and profitably expand to multiple new greenfield markets after developing the company’s first franchise model. Previously Mr. Engskov worked for Madrona Venture Group, LLC, a Seattle-based venture capital fund. Early in his career, he worked in public service. From 1993 to 2000, Mr. Engskov held a number of positions in the Clinton White House, including Assistant Press Secretary and Personal Aide to the President. He received his B.A. in Public Administration from the University of Arkansas.
Jason Doren
Jason Doren is General Counsel for ARCH, joining the firm in 2019. He is responsible for all legal and regulatory matters for ARCH and its investment funds, as well as strategic portfolio matters. Most recently, Mr. Doren was Chief Administrative Officer and General Counsel of Kleiner Perkins. Prior to Kleiner Perkins, Mr. Doren was General Counsel of SVB Capital, the venture capital investing division of SVB Financial Group, and served as Assistant General Counsel of SVB Financial Group where he was responsible for a variety of matters including strategic investments, international expansion, M&A and SVB Financial Group’s government affairs efforts. Earlier in his career, Mr. Doren was with Cooley LLP where he represented venture capital funds and venture capital-backed companies, and prior to Cooley he was a trial attorney with Bronson, Bronson & McKinnon LLP in San Francisco. Mr. Doren has over 25 years of legal and venture capital industry experience. He is a founding member of the NVCA General Counsel Advisory Board,
co-chaired
the Advanced Venture Capital seminar for the Practicing Law Institute, a
non-profit
committed to continuing legal education, and served on the Advisory Board for the Stanford University Venture Capital Directors’ College. Mr. Doren earned his law degree from the UCLA School of Law and holds a B.S. in Finance, summa cum laude, from the University of Illinois.
Mark McDonnell
Mark McDonnell is a Managing Director, Chief Financial and Chief Administrative Officer for ARCH. Mr. McDonnell joined ARCH in 1999. He oversees the operational, financial, and administrative aspects of the firm. He also is responsible for developing and managing limited partner and strategic relationships for ARCH. Previously, Mr. McDonnell held the position of CFO at Marquette Venture Partners. He has also held roles in financial management with Enterprise Systems, a healthcare software developer acquired by HBO & Co., and with KPMG, LLP, serving clients primarily in the information and communication industries. Mr. McDonnell holds a B.S. in Accounting from Marquette University and is a certified public accountant.
Paul Fielding
Paul Fielding, joined Revolution Healthcare Acquisition Corp. effective August 19, 2021. He is also part of General Catalyst Partners, LLC, since March 2021. Prior to joining General Catalyst in March 2021, Mr. Fielding served as Managing Partner at Grenet Partners from June 2019 until December 2020. Before Joining Grenet Partners, Mr. Fielding served as a Principal at General Catalyst from June 2018 until June 2019. Mr. Fielding served as Vice President of Products, Pricing, and Risk at SoFi from May 2013 until March 2018. Mr. Fielding was responsible for financial product design, loan features, and daily pricing for SoFi’s lending businesses. Mr. Fielding also led Capital Markets for SoFi, launching its financing platform where he and his team raised over $12B through securitizations, loan sales, and other private transactions and oversaw $3B+ in borrowings. Prior to joining SoFi, Mr. Fielding was a principal and
co-founder
at MeasureOne, a student lending focused data and analytics firm offering portfolio management, servicing oversight, and analytics services. Paul holds a B.A., magna cum laude, in Economics and Accounting from UCLA.
Market Opportunity
We believe the intersection of health care, life sciences and technology is one of the most significant value creative opportunities of this decade. Although the U.S. spends $4 trillion on health care each year, the U.S.
 
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healthcare system can be extremely difficult and painful to navigate. It fails to provide positive experiences for the consumer, and thereby leads to a behavior of avoidance of care unless deemed absolutely necessary. As a result, those suffering with disease are often neglected by the health care system, whether or not by choice, and those who would otherwise be more proactive fail to procure care due to the health care system’s inherent complexity. We believe there is a huge opportunity to address these inefficiencies and reduce U.S. health care spend while still capturing immense value. If tech entrepreneurs and the traditional health care ecosystem, including the life sciences sector, work together to realign health care around the patient, we believe the space will generate more than ten to fifteen $100 billion companies.
As part of our initial market assessment, we have identified the mental health and well-being segment as the most significant unmet need in the U.S. health care system today. Mental health-spanning services such as wellness, talk therapy, addiction and medication-tops the list of medical spending categories with $212 billion in annual health care spend, beating both cardiovascular disease and diabetes by a substantial margin, and an estimated 51.5 million American adults (i.e., 20% of American adults) suffer from mental illness. Furthermore, these numbers only scratch the surface of what the true cost is of the
crisis-it
is estimated that an additional $192 billion of earnings is lost each year due to mental health related absenteeism, which doesn’t even include indirect costs, like productivity, employee turnover and job satisfaction. As a result, and further exacerbated by the adverse psychological impacts of
COVID-19,
we have found ourselves in the midst of a mental health pandemic afflicting people around the world and impacting people across the age and socioeconomic spectrum.
However, since mental health treatment does not always require physical presence, it is an ideal place to use technology to connect patients with doctors, therapists, software and hardware applications, and perhaps most importantly, each other. It is also an area of care that lacks well adjudicated and informed ways to measure the success of various treatments, including pharmaceuticals. We believe that the time is right for this to change through the use of modern tools. RHAC is exploring comprehensive solutions in mental health across the continuum of well-being, prevention and treatment that we believe can address all patients seeking treatment, regardless of disease severity. The unmet need is immense, and so too is the benefit to people and society.
Our business combination and value creation strategy is to identify and complete our Initial Business Combination with this substantial market opportunity existing at this intersection of health care, life sciences and technology. Globally, there are 46 health care unicorns, valued in aggregate at $110 billion, with over $55 billion of cumulative value in digital health unicorns alone. The public markets have seen the successful IPOs of several multi-billion dollar digital health companies over the last few years, including Teladoc, Amwell, and GoodRx, which currently have a combined market value of >$55 billion. This growth in the digital health sector is only set to increase with the tailwinds presented by catalyzing events, including the
COVID-19
pandemic, evidenced by a record-setting $8.9 billion of digital health venture funding in 2020.
As the last several months have demonstrated, periods of market volatility and dislocation can present even the highest quality health care, life sciences or technology companies with challenges accessing the public markets through a traditional IPO. While there has been an increasing number of health care and technology-focused blank check companies issued in recent months, we believe no other has the same degree of coherent vision, alignment with stakeholders, combination of sector expertise, entrepreneurial mindset, track record, and desire for transformational change. We believe we can provide a high-quality company with a lower risk path to the public capital markets while also providing our investors option value on an investment in these types of companies during periods of market volatility. The recent cohort of blank check company IPOs and validation by the involvement of bulge bracket investment banks and advisors have shown support for the effectiveness of this vehicle and substantiates our strategy. Revolution Healthcare Acquisition Corp. will be the only blank check company searching for its Initial Business Combination led by a team that includes seasoned health care, life sciences and technology company founders and entrepreneurs with operational public company experience and an unprecedented track record for successfully effecting positive change. We believe the market opportunity is aligned with the advantages we bring to a potential target and the vehicle allows us to leverage our capabilities and create value by serving massive unmet market needs.
 
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Competitive Advantage
We believe our founder-first ethos, our unique wealth of experience transforming industries through innovation, our commitment to building enduring companies, and our focus on a patient-centric model for health care delivery give us a huge advantage in our quest to source and attract
best-in-class,
disruptive companies which sit at the intersection between health care, life sciences and technology. Our competitive strengths include:
 
   
Pioneers in patient-centric health care delivery
: Our team has crystallized a coherent vision of the future of health care through patient-centric care delivery models, and successfully executed on this vision with Livongo and other ventures. This unparalleled focus and experience will enable us to provide invaluable advice to management teams of other early-stage patient-centric health care companies with the potential to be market leaders in their categories.
 
   
Cross-industry, cross-disciplinary talent
: Our team has created and operated multi-billion dollar companies in the health care, life sciences and technology sectors. Many of these experiences were shared endeavors by members of our cross-disciplinary team. We have demonstrated a talent for spotting winning trends at the intersection of health care, life sciences and technology, and building companies to capitalize on these.
 
   
Experience building platforms at the cutting edge of technology and life sciences
: We have been at the forefront of building new, broad platforms across technology, biotechnology and life sciences. These platforms have led the way in cellular therapy (Juno), precision medicine (Vertex), genomics (GRAIL, Illumina), payments (Stripe) and telehealth (Livongo, Ro). We are focused on creating platforms and leveraging technology that can drive a step change, as opposed to incremental improvements in features and outcomes.
 
   
Experts in unscaled health care at scale
: Patient-centric care calls for a new era of care that is personalized and ‘unscaled’ using artificial intelligence-based techniques. We have deep experience in mass personalization techniques that enable platforms to provide care that feels tailored to the patient, even as they grow to serve hundreds of thousands and even millions of consumers.
 
   
Deep networks
: Our deep networks serve as a tool to find the best businesses and to match founders with top talent to fill areas of need and grow their businesses efficiently and intelligently.
 
   
Impressive track record
: We have an outstanding investment track record demonstrating a commitment to our strategy and core values, robust shareholder returns, and development of enduring businesses, including Airbnb, Vertex, Juno, Livongo, GRAIL, Snap, Stripe and others.
 
   
Mission-driven, principled
: Our methods are rooted in respect for strong governance, responsible innovation, and a desire to nurture diversity, creativity and mindfulness.
Our Business Strategy
The U.S. health care system has reached a pivotal moment as the lines between health care, life sciences and technology have blurred, and the next generation of innovation is ushered in through a digital transformation of health care. Concurrently, the consumer (i.e., the patient) has grown increasingly more frustrated by the sick, rigid and broken health care system and yearns to be empowered by broadly accessible, intuitive solutions that serve to enhance their experience and optimize clinical outcomes. Our goal is to invest in revolutionary platforms that will drive the transformation of our health care system into a patient-centric technology-driven model of care. We will facilitate this paradigm shift with technologies like wearable sensors, remote continuous data capture, point of care diagnostics, telehealth capabilities and artificial intelligence/machine learning tools.
More specifically, we have identified the mental health and well-being segment as the largest underserved medical need in the U.S. health care system today. It is an area so underappreciated and stigmatized that most insurers don’t cover costs for care. Mental, emotional and spiritual suffering are no less real than physical suffering. But whereas sufferers of physical ailments have access and coverage, those suffering from conditions of the mind must bear the pain alone. As a result of limited mental health care options, 60% of youth diagnosed
 
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with depression in the U.S. do not receive any form of mental health care. Furthermore, there is low adoption of evidence-based treatment models and
algorithms-the
shortage of office-based psychiatrists coupled with the stigma associated with office-based care drives a significantly undertreated population; roles of talk therapy and drug therapy are poorly defined and no central data repositories exist for studying effectiveness of different treatment regimens or predicting successful outcomes.
The unmet need within mental health in the U.S. is underscored by looking at recent suicide statistics-suicide today is responsible for killing more soldiers than combat, claims more lives in the U.S. than breast cancer and has become the second most leading cause of death in the U.S. for people under 34 years old. In addition, over 18% of American adults have anxiety, 10% of American youths have severe major depression, roughly 20 million adults struggle with substance abuse and over 70 million Americans die each year from drug overdose.
Analogous to prevention and treatment of physical ailments, there is a spectrum of mental and behavioral health and well-being. It ranges from preventive practices (e.g., cognitive programs, digital therapeutics, mindfulness, etc.), to clinical therapy (e.g., individual and group therapy), and finally institutional care that takes place at outpatient facilities or mental hospitals. And because mental health doesn’t require physical presence, it is an ideal place to use technology to connect patients with doctors, therapists, software and hardware applications, and perhaps most importantly, each other to deliver more personalized care. Further, from the more recent influence of genetics and prenatal health, we are able to learn more about the critical points in brain development and life experiences that increase the risk for the development of mental health disorders-this innovation has begun to play a key role in driving preventative care models through lightweight therapy, building emotional skill sets and other important practices. Our vision for a total health care revolution focuses into the mental health arena in expanding care through technology and evidence-based integrated treatment protocols to deliver personalized, effective and cost-effective mental health care services in a virtual or home setting.
We see another potential vector in home based care, particularly for our elderly population. U.S. Medicare spend reached nearly $800 billion in 2019, making up roughly 21% of total annual U.S. health care spend. Recent census data indicates that roughly 61 million Americans were over the age of 65 in 2019, and the
65-and-older
age group’s share of the total U.S. adult population reached 23%. Although age isn’t everything, it certainly has a dramatic impact on service distribution as over 80% of that age group suffers from chronic conditions. Furthermore, issues in senior care have been exacerbated by the recent
COVID-19
crisis, where 40% of reported deaths from the virus have occurred in nursing homes. This dynamic has resulted in seniors wanting to live independently, and now more than 90% express the intent to age in place. We view patient-centric technology driven care models as providing the vehicle to shifting senior care, as well as broader population health care, back to the home, where consumers are more comfortable and in many cases, safer. Beyond mental health and home based care, there are additional sectors ripe for technology driven change and a patient and consumer centric model to improve care and outcomes, lower cost, and enable science and medical advancements that create a feedback loop which deliver further improvement in care and outcomes and even lower costs. Other areas of interest and focus include data-driven care, population health and various other chronic conditions.
Our recent experience building companies such as Livongo and GRAIL have demonstrated that patient-centric health care companies can generate both positive clinical outcomes and outsized shareholder returns. By facilitating early detection of cancer, eliminating the hassle of managing chronic disease, designing the experience around the individual and whole-person care, and building trust with patients, we validated the market need for these revolutionary platforms and realized huge economic successes. However, these are just a few
use-cases
we envision for the broader health care revolution. There is a myriad of consumer personas that deserve the same excellent care experiences, and there are dozens of infrastructure companies required to support this sectoral shift.
Our strategy, based on our core beliefs and values, is to identify a business combination where we can play an impactful role in partnership with a like-minded patient-centric business model that embeds technology driven
 
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models to transform the patient experience into one that is both convenient and easily accessible, and thereby serving to optimize outcomes for all stakeholders. Instead of improving inflexible systems, we want to reinvent these systems, to bend the cost and quality curve, and to overcome the entrenched resistance to change. We want to empower good ideas and disruptive technologies to improve outcomes for the most important consumer—the patient. We believe that if you create a great user experience of value, you have an open road to building a multi-billion dollar success story like Livongo, Airbnb, or Stripe.
For our business combination, we are looking for companies that are aligned with our vision to revolutionize health care, are led by mission-driven CEOs committed to responsible innovation, and have high growth potential in markets with TAM expansion opportunities. We are interested in companies building patient-centric health care models, care delivery approaches that enable the progression toward the home, virtual health care services that increase patient access and affordability, new models to manage risk and pay for care, and algorithms that can drive therapeutic innovation, guide treatment decisions and proactively screen or monitor disease. Using this framework, we are creating RHAC to identify companies that can be transformed into category leaders best positioned in the public markets. We believe we are well placed to help a transformational company, aligned with our philosophy, to the public markets, and then to help it grow, thrive, and succeed in its mission. Our partnership has value far beyond our capital, unlocking the potential of a disruptive business to revolutionize care, supported by our team’s deep industry, operational and product experience, extensive networks, and track records as investors, advisors, executives, and board members. Our alignment with the economic transformation of the industry will make this a vehicle with which the best entrepreneurs will want to work.
Business Combination Criteria
While we may decide to enter into a business combination with a business that does not meet these criteria, we intend to seek a business combination:
 
   
sitting at the intersection between technology, health care and life sciences, including patient-centric, data-driven, cloud-based platforms;
 
   
that has the potential to change the health care system to benefit the patient (built with empathy, cuts down costs, and prioritizes personalization and patient outcomes);
 
   
where we can materially impact the value and growth of the company in partnership with management;
 
   
address disease areas that are ripe for disruption due to dismal patient experience (e.g., mental health and well-being, home based care);
 
   
close to our proximal networks of founders, operators, investors, and advisors; and
 
   
where we have a differentiated view on the ability of the target to create value as a public company.
We anticipate offering the following benefits to our business combination partner:
 
   
partnership with our management team members who have extensive track records of founding, operating, advising, and investing in market-leading health care, life sciences and technology companies;
 
   
access to our network of leading industry executives, entrepreneurs, and investors;
 
   
increase company presence and visibility with strategic partners, customers, employers, payors, and vendors;
 
   
higher engagement with core, relevant, fundamental investors as anchor stockholders than a traditional IPO book-building process would offer;
 
   
lower risk and expedited path to a public listing with flexible structuring;
 
   
infusion of cash and ongoing access to public capital markets;
 
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listed public currency for future acquisitions and growth;
 
   
ability for management to retain control and focus on growing the business; and
 
   
opportunity to motivate and retain employees using stock-based compensation.
Initial Business Combination
Nasdaq rules and our Initial Business Combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the net assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account) at the time of signing a definitive agreement in connection with our Initial Business Combination and that a majority of our independent directors approve such Initial Business Combination (s). If our Board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent valuation or appraisal firm with respect to the satisfaction of such criteria. Our stockholders may not be provided with a copy of such opinion nor will they be able to rely on such opinion.
We anticipate and aim to complete our Initial Business Combination only if the post-business combination company in which our public stockholders own shares will own or acquire 50% or more of the outstanding voting securities of the target or is otherwise not required to register as an investment company under the Investment Company Act. Even if the post-business combination company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to our Initial Business Combination may collectively own a minority interest in the post-business combination company, depending on valuations ascribed to the target and us in the business combination transaction. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-business combination company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test;
 provided
 that in the event that the business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses and we will treat the target businesses together as the Initial Business Combination for purposes of a tender offer or for seeking stockholder approval, as applicable.
In evaluating a prospective target business, we will conduct an extensive due diligence review which may encompass, as applicable and among other things, meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities and a review of financial and other information about the target and its industry. We will also utilize our management team’s operational and capital planning experience. If we determine to move forward with a particular target, we will proceed to structure and negotiate the terms of the business combination transaction. The time required to select and evaluate a target business and to structure and complete our Initial Business Combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of, and negotiation with, a prospective target business with which our Initial Business Combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination. The company will not pay any consulting fees to members of our management team, or their respective affiliates, for services rendered to or in connection with our Initial Business Combination. In addition, we have agreed not to enter into a definitive agreement regarding an Initial Business Combination without the prior consent of our sponsor.
Other Considerations
We are not prohibited from pursuing an Initial Business Combination or subsequent transaction with a company that is affiliated with ARCH, General Catalyst, HAAC, or our initial stockholders, officers or directors. In the event we seek to complete our Initial Business Combination with a company that is affiliated with ARCH, General Catalyst, HAAC, or any of our initial stockholders, officers or directors, we, or a committee of
 
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independent directors, will obtain an opinion from an independent investment banking firm or an independent valuation or accounting firm that such Initial Business Combination or transaction is fair to our company from a financial point of view.
Affiliates of ARCH, General Catalyst and members of our Board will directly or indirectly own alignment shares and private placement warrants following the Initial Public Offering and, accordingly, may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our Initial Business Combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers or directors were to be included by a target business as a condition to any agreement with respect to our Initial Business Combination.
We currently do not have any specific business combination under consideration. Our officers and directors have neither individually selected nor considered a target business nor have they had any substantive discussions regarding possible target businesses among themselves or with our underwriter or other advisors. ARCH, and General Catalyst HAAC are continuously made aware of potential business opportunities, one or more of which we may desire to pursue for a business combination, but we have not (nor has anyone on our behalf) contacted any prospective target business or had any substantive discussions, formal or otherwise, with respect to a business combination transaction with our company. We have not (nor have any of our agents or affiliates) been approached by any candidates (or representative of any candidates) with respect to a possible acquisition transaction with us and we will not consider a business combination with any company that has already been identified to ARCH, General Catalyst HAAC or CPAR as a suitable acquisition candidate for it, unless ARCH, or General Catalyst HAAC, as applicable, in their sole discretion, declines such potential business combination or makes available to us a
co-investment
opportunity in accordance with ARCH or General Catalyst’s applicable existing and future policies and procedures, as applicable. Additionally, we have not, nor has anyone on our behalf, taken any substantive measure, directly or indirectly, to select or locate any suitable acquisition candidate for us, nor have we engaged or retained any agent or other representative to select or locate any such acquisition candidate.
Each of ARCH and General Catalyst may manage multiple investment vehicles and raise additional funds and/or successor funds in the future, which may be during the period in which we are seeking our Initial Business Combination. These ARCH and General Catalyst investment entities may be seeking acquisition opportunities and related financing at any time. We may compete with any one or more of them on any given acquisition opportunity.
In addition, certain of our founders, officers and directors presently have, and any of them in the future may have additional, fiduciary and contractual duties to other entities, including, without limitation, HAAC, CPAR, investment funds, accounts,
co-investment
vehicles and other entities managed by affiliates of ARCH or General Catalyst and certain companies in which ARCH, General Catalyst or such entities have invested. As a result, if any of our founders, officers or directors becomes aware of a business combination opportunity, which is suitable for an entity to which he, she or it has then-current fiduciary or contractual obligations (including, without limitation, HAAC, CPAR, any ARCH or General Catalyst funds or other investment vehicles), then, subject to their fiduciary duties under applicable law, he or she will need to honor such fiduciary or contractual obligations to present such business combination opportunity to such entity, before we can pursue such opportunity. If these funds or investment entities decide to pursue any such opportunity, we may be precluded from pursuing the same. In addition, investment ideas generated within or presented to ARCH, General Catalyst, HAAC, CPAR or our founders may be suitable for both us and a current or future ARCH or General Catalyst fund, portfolio company or other investment entity (including HAAC and CPAR) and, subject to applicable fiduciary duties, will first be directed to such fund, portfolio company or other entity before being directed, if at all, to us. None of ARCH, General Catalyst, HAAC, CPAR, our founders or any members of our Board who serve as an officer or director of HAAC or CPAR or are also employed by ARCH, General Catalyst or its affiliates have any obligation to present us with any opportunity for a potential business combination of which they become aware solely in their capacities as officers or executives of ARCH or General Catalyst, as applicable.
 
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In addition, our founders, officers and directors, are not required to commit any specified amount of time to our affairs and, accordingly, will have conflicts of interest in allocating management time among various business activities, including identifying potential business combinations and monitoring the related due diligence. Moreover, our founders, officers and directors have, and will have in the future, time and attention requirements for current and future special purpose acquisition companies investment funds, accounts,
co-investment
vehicles and other entities managed by ARCH or General Catalyst (including HAAC and CPAR). To the extent any conflict of interest arises between, on the one hand, us and, on the other hand, special purpose acquisition companies investment funds, accounts,
co-investment
vehicles and other entities managed by ARCH or General Catalyst (including, without limitation, arising as a result of certain of our founders, officers and directors being required to offer acquisition opportunities to such special purpose acquisition companies investment funds, accounts,
co-investment
vehicles and other entities), ARCH, General Catalyst and its affiliates will resolve such conflicts of interest in their sole discretion in accordance with their then existing fiduciary, contractual and other duties and there can be no assurance that such conflict of interest will be resolved in our favor.
Corporate Information
We currently maintain our executive offices at 20 University Road, Cambridge, Massachusetts 02138. The cost for our use of this space is included in the $10,000 per month fee we pay to an affiliate of our sponsor for office space, administrative and support services. We consider our current office space adequate for our current operations.
We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more businesses, which we refer to throughout Annual Report on Form
10-K
as our Initial Business Combination. Our mission is to partner with leading businesses at the intersection of health care, life sciences and technology to redesign health care around the patient. To date, our efforts have been limited to organizational activities as well as activities related to the Initial Public Offering. We have not selected any business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. We have generated no operating revenues to date, and we do not expect that we will generate operating revenues until we consummate our Initial Business Combination.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a
non-binding
advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile. In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our Initial Public Offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our shares of Class A common stock that are held by
non-affiliates
exceeds
 
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$700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in
non-convertible
debt during the prior three-year period.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation
S-K.
Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by
non-affiliates
is equal to or exceeds $250 million as of the prior June 30, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by
non-affiliates
is equal to or exceeds $700 million as of the prior June 30. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.
Status as a Public Company
We believe our structure will make us an attractive business combination partner to target businesses. As an existing public company, we offer a target business an alternative to the traditional Initial Public Offering through a merger or other business combination with us. In a business combination transaction with us, the owners of the target business may, for example, exchange their shares of stock in the target business for our shares of Class A common stock (or shares of a new holding company) or for a combination of our shares of Class A common stock and cash, allowing us to tailor the consideration to the specific needs of the sellers. We believe target businesses will find this method a more expeditious and cost effective method to becoming a public company than the typical Initial Public Offering. The typical Initial Public Offering process takes a significantly longer period of time than the typical business combination transaction process, and there are significant expenses in the Initial Public Offering process, including underwriting discounts and commissions, that may not be present to the same extent in connection with a business combination with us.
Furthermore, once a proposed business combination is completed, the target business will have effectively become public, whereas an Initial Public Offering is always subject to the underwriter’s ability to complete the offering, as well as general market conditions, which could delay or prevent the offering from occurring or have negative valuation consequences. Once public, we believe the target business would then have greater access to capital, an additional means of providing management incentives consistent with stockholders’ interests and the ability to use its shares as currency for acquisitions. Being a public company can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented employees.
While we believe that our structure and our management team’s backgrounds will make us an attractive business partner, some potential target businesses may view our status as a blank check company, such as our lack of an operating history and our ability to seek stockholder approval of any proposed Initial Business Combination, negatively.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a
non-binding
advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved, If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying
 
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with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our Initial Public Offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our shares of Class A common stock that are held by
non-affiliates
exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in
non-convertible
debt during the prior three-year period.
Financial Position
With funds available for a business combination initially in the amount of $550,000,000 (assuming no redemptions), we offer a target business a variety of options such as creating a liquidity event for its owners, 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 complete our 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. However, we have not taken any steps to secure third-party financing and there can be no assurance it will be available to us.
Effecting Our Initial Business Combination
General
We are not presently engaged in, and we will not engage in, any operations for an indefinite period of time following the Initial Public Offering. We intend to effectuate our Initial Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the private placement warrants, our equity, debt or a combination of these as the consideration to be paid in our Initial Business Combination. We may seek to complete our Initial Business Combination with a company or business that may be financially unstable or in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.
If our Initial Business Combination is paid for using equity or debt, or not all of the funds released from the Trust Account are used for payment of the consideration in connection with our Initial Business Combination or used for redemptions of our shares of Class A common stock, we may apply the balance of the cash released to us from the Trust Account for general corporate purposes, including for maintenance or expansion of operations of the post-business combination company, the payment of principal or interest due on indebtedness incurred in completing our Initial Business Combination, to fund the purchase of other companies or for working capital.
We have not selected any business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions with any business combination target. Additionally, we have not engaged or retained any agent or other representative to identify or locate any suitable acquisition candidate, to conduct any research or take any measures, directly or indirectly, to locate or contact a target business, other than our officers and directors. Accordingly, there is no current basis for investors to evaluate the possible merits or risks of the target business with which we may ultimately complete our Initial Business Combination. Although our management will assess the risks inherent in a particular target business with which we may combine, we cannot assure you that this assessment will result in our identifying all risks that a target business may encounter. Furthermore, some of those risks may be outside of our control, meaning that we can do nothing to control or reduce the chances that those risks will adversely affect a target business.
We may need to obtain additional financing to complete our Initial Business Combination, either because the transaction requires more cash than is available from the proceeds held in our Trust Account, or because we
 
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become obligated to redeem a significant number of our public shares upon completion of the business combination, in which case we may issue additional securities or incur debt in connection with such business combination. There are no prohibitions on our ability to issue securities or incur debt in connection with our Initial Business Combination. We are not currently a party to any arrangement or understanding with any third-party with respect to raising any additional funds through the sale of securities, the incurrence of debt or otherwise.
Sources of Target Businesses
We have not selected any business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. Certain members of our management team are officers or directors of HAAC or CPAR or are employed by ARCH, General Catalyst or their respective affiliates. ARCH, General Catalyst, HAAC and CPAR are continuously made aware of potential business opportunities, one or more of which we may desire to pursue, for a business combination, but we have not (nor has anyone on our behalf) contacted, or had any discussions, formal or otherwise with, any prospective target business with respect to a business combination transaction with us.
We anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment market participants, private equity groups, investment banking firms, consultants, accounting firms, and large business enterprises. 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 in which they think we may be interested on an unsolicited basis, since some of these sources will have read the initial public offering final 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. In addition, we expect to receive a number of proprietary deal flow opportunities that would not otherwise necessarily be available to us as a result of the business relationships of our officers and directors. 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. We will engage a finder only to the extent our management determines that the use of a finder may bring opportunities to us that may not otherwise be available to us or if finders approach us on an unsolicited basis with a potential transaction that our management determines is in our best interest to pursue. Payment of finder’s fees is customarily tied to completion of a transaction, in which case any such fee will be paid out of the funds held in the Trust Account. In no event, however, will our sponsor or any of our existing officers or directors, or their respective affiliates paid by us any finder’s fee, consulting fee or other compensation prior to, or for any services they render in order to effectuate, the completion of our Initial Business Combination (regardless of the type of transaction that it is). We have agreed to pay an affiliate of our sponsor a total of $10,000 per month for office space, secretarial and administrative support and to reimburse our sponsor for any
out-of-pocket
expenses related to identifying, investigating and completing an Initial Business Combination. Some of our officers and directors may enter into employment or consulting agreements with the post-business combination company following our Initial Business Combination. The presence or absence of any such fees or arrangements will not be used as a criterion in our selection process of an acquisition candidate.
We are not prohibited from pursuing an Initial Business Combination with a company that is affiliated with ARCH, General Catalyst, HAAC, CPAR, our initial stockholders, officers or directors. In the event we seek to complete our Initial Business Combination with a company that is affiliated with ARCH, General Catalyst, HAAC, CPAR or our initial stockholders or any of our officers or directors, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm that such Initial Business Combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context.
 
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Each of our officers and directors presently has, and any of them in the future may have, additional, fiduciary or contractual obligations to other entities, including HAAC, CPAR and other entities that are affiliates of our initial stockholders, pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such entity, subject to their fiduciary duties under Delaware law. See “Item 10. Directors, Executive Officers and Corporate Governance—Conflicts of Interest”
Evaluation of a Target Business and Structuring of Our Initial Business Combination
In evaluating a prospective target business, we expect to conduct an extensive due diligence review which may encompass, as applicable and among other things, meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities and a review of financial and other information about the target and its industry. We will also utilize our management team’s operational and capital planning experience. If we determine to move forward with a particular target, we will proceed to structure and negotiate the terms of the business combination transaction.
The time required to select and evaluate a target business and to structure and complete our Initial Business Combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of, and negotiation with, a prospective target business with which our Initial Business Combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination. The company will not pay any consulting fees to members of our management team, or their respective affiliates, for services rendered to or in connection with our Initial Business Combination. In addition, we have agreed not to enter into a definitive agreement regarding an Initial Business Combination without the prior consent of our sponsor.
Lack of Business Diversification
For an indefinite period of time after the completion of our Initial Business Combination, the prospects for our success may depend entirely on the future performance of a single business. Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line of business. By completing our Initial Business Combination with only a single entity, our lack of diversification may:
 
   
subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our Initial Business Combination; and
 
   
cause us to depend on the marketing and sale of a single product or limited number of products or services.
Limited Ability to Evaluate the Target’s Management Team
Although we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our Initial Business Combination with that business, our assessment of the target business’s management may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot presently be stated with any certainty. The determination as to whether any of the members of our management team will remain with the combined company will be made at the time of our Initial Business Combination. While it is possible that one or more of
 
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our directors will remain associated in some capacity with us following our Initial Business Combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our Initial Business Combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.
We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time of our Initial Business Combination.
Following a business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Stockholders May Not Have the Ability to Approve Our Initial Business Combination
We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC subject to the provisions of our amended and restated certificate of incorporation. However, we will seek stockholder approval if it is required by applicable law or stock exchange listing requirement, or we may decide to seek stockholder approval for business or other reasons.
Under Nasdaq’s listing rules, stockholder approval would typically be required for our Initial Business Combination if, for example:
 
   
we issue common stock that will be equal to or in excess of 20% of the number of our common stock then-outstanding (other than in a public offering);
 
   
any of our directors, officers or substantial security holder (as defined by the Nasdaq rules) has a 5% or greater interest, directly or indirectly, in the target business or assets to be acquired or otherwise and the present or potential issuance of common stock could result in an increase in issued and outstanding common stock or voting power of 1% or more (or 5% or more if the related party involved is classified as such solely because such person is a substantial security holder); or
 
   
the issuance or potential issuance of common stock will result in our undergoing a change of control.
The decision as to whether we will seek stockholder approval of a proposed business combination in those instances in which stockholder approval is not required by law will be made by us, solely in our discretion, and will be based on business and reasons, which include a variety of factors, including, but not limited to:
 
   
the timing of the transaction, including in the event we determine stockholder approval would require additional time and there is either not enough time to seek stockholder approval or doing so would place the company at a disadvantage in the transaction or result in other additional burdens on the company;
 
   
the expected cost of holding a stockholder vote;
 
   
the risk that the stockholders would fail to approve the proposed business combination;
 
   
other time and budget constraints of the company; and
 
   
additional legal complexities of a proposed business combination that would be time-consuming and burdensome to present to stockholders.
Permitted Purchases and Other Transactions with Respect to Our Securities
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 initial stockholders,
 
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directors, executive officers, advisors or their affiliates may purchase shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of our Initial Business Combination. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the Trust Account will be used to purchase shares or public warrants in such transactions. If they engage in such transactions, they will be restricted from making any such purchases when they are in possession of any material
non-public
information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act.
In the event that our initial stockholders, directors, officers, advisors or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules.
The purpose of any such purchases of shares could be to (i) vote such shares in favor of the Initial Business Combination and thereby increase the likelihood of obtaining stockholder approval of the Initial Business Combination or (ii) to satisfy a closing condition in an agreement with a candidate for our Initial Business Combination that requires us to have a minimum net worth or a certain amount of cash at the closing of our Initial Business Combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our Initial Business Combination. Any such purchases of our securities may result in the completion of our Initial Business Combination that may not otherwise have been possible.
In addition, if such purchases are made, the public “float” of our shares of Class A common stock or public warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
Our initial stockholders, officers, directors and/or their affiliates may identify the stockholders with whom our initial stockholders, officers, directors or their affiliates may pursue privately negotiated transactions by either the stockholders contacting us directly or by our receipt of redemption requests submitted by stockholders (in the case of shares of Class A common stock) following our mailing of tender offer or proxy materials in connection with our Initial Business Combination. To the extent that our initial stockholders, officers, directors, advisors or their affiliates enter into a private transaction, they would identify and contact only potential selling or redeeming stockholders who have expressed their election to redeem their shares for a pro rata share of the Trust Account or vote against our Initial Business Combination, whether or not such stockholder has already submitted a proxy with respect to our Initial Business Combination but only if such shares have not already been voted at the stockholder meeting related to our Initial Business Combination. Our initial stockholders, executive officers, directors, advisors or their affiliates will select which stockholders to purchase shares from based on the negotiated price and number of shares and any other factors that they may deem relevant, and will be restricted from purchasing shares if such purchases do not comply with Regulation M under the Exchange Act and the other federal securities laws.
Our initial stockholders, officers, directors and/or their affiliates will be restricted from making purchases of shares if the purchases would violate Section 9(a)(2) or Rule
10b-5
of the Exchange Act. We expect any such purchases would be reported by such person pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.
 
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Redemption Rights for Public Shareholders upon Completion of Our Initial Business Combination
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our Initial Business Combination at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the Initial Business Combination, including interest earned on the funds held in the Trust Account (net of permitted withdrawals and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the Trust Account is initially anticipated to be $10.00 per public share. Our initial stockholders, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any alignment shares and public shares they may hold in connection with the completion of our Initial Business Combination.
Limitations on Redemptions
Our amended and restated certificate of incorporation provides that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001. In addition, our proposed Initial Business Combination may impose a minimum cash requirement for: (i) cash consideration to be paid to the target candidate or its owners; (ii) cash for working capital or other general corporate purposes; or (iii) the retention of cash to satisfy other conditions. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed Initial Business Combination exceed the aggregate amount of cash available to us, we will not complete the Initial Business Combination or redeem any shares in connection with such Initial Business Combination, and all shares of Class A common stock submitted for redemption will be returned to the holders thereof.
Manner of Conducting Redemptions
We will provide our public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of our Initial Business Combination either (i) in connection with a stockholder meeting called to approve the business combination or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under applicable law or stock exchange listing requirement or whether we were deemed to be a foreign private issuer (which would require a tender offer rather than seeking stockholder approval under SEC rules). Asset acquisitions and share purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 5% of our shares of outstanding common stock or seek to amend our amended and restated certificate of incorporation would require stockholder approval. We will conduct redemptions in connection with a stockholder vote unless stockholder approval is not required by applicable law or stock exchange listing requirement and we choose to conduct redemptions pursuant to the tender offer rules of the SEC for business or other legal reasons. So long as we obtain and maintain a listing for our securities on the Nasdaq, we will be required to comply with the Nasdaq rules.
If we held a stockholder vote to approve our Initial Business Combination, we will, pursuant to our amended and restated certificate of incorporation:
 
   
conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules; and
 
   
file proxy materials with the SEC.
 
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In the event that we seek stockholder approval of our Initial Business Combination, we will distribute proxy materials and, in connection therewith, provide our public stockholders with the redemption rights described above upon completion of the Initial Business Combination.
If we seek stockholder approval, we will complete our Initial Business Combination only if a majority of the common stock, represented in person or by proxy and entitled to vote thereon, voted at a stockholder meeting are voted in favor of the business combination. In such case, our initial stockholders and each member of our management team have agreed to vote their alignment shares and public shares in favor of our Initial Business Combination. As a result, in addition to our initial stockholder’s Alignment Shares, we would need 20,625,001, or 37.5% of the 55,000,000 Public Shares sold in the Initial Public Offering to be voted in favor of an Initial Business Combination in order to have our Initial Business Combination approved (assuming all outstanding shares are voted and the over-allotment option is not exercised). Each public stockholder may elect to redeem their public shares irrespective of whether they vote for or against the proposed transaction or vote at all. In addition, our initial stockholders and each member of our management team have entered into an agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any alignment shares and public shares held by them in connection with (i) the completion of a business combination and (ii) a stockholder vote to approve an amendment to our amended and restated certificate of incorporation (A) that would modify the substance or timing of our obligation to provide holders of our shares of Class A common stock the right to have their shares redeemed in connection with our Initial Business Combination or to redeem 100% of our public shares if we do not complete our Initial Business Combination within 24 months from the closing of our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class) or (B) with respect to any other provision relating to the rights of holders of our shares of Class A common stock.
If we conduct redemptions pursuant to the tender offer rules of the SEC, we will, pursuant to our amended and restated certificate of incorporation:
 
   
conduct the redemptions pursuant to Rule
13e-4
and Regulation 14E of the Exchange Act, which regulate issuer tender offers; and
 
   
file tender offer documents with the SEC prior to completing our Initial Business Combination which contain substantially the same financial and other information about the Initial Business Combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies.
Upon the public announcement of our Initial Business Combination, if we elect to conduct redemptions pursuant to the tender offer rules, we and our initial stockholders will terminate any plan established in accordance with Rule
10b5-1
to purchase shares of Class A common stock in the open market, in order to comply with Rule
14e-5
under the Exchange Act.
In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule
14e-1(a)
under the Exchange Act, and we will not be permitted to complete our Initial Business Combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than the number of public shares we are permitted to redeem. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete such Initial Business Combination.
Limitation on Redemption upon Completion of Our Initial Business Combination If We Seek Stockholder Approval
If we seek stockholder approval of our Initial Business Combination and we do not conduct redemptions in connection with our Initial Business Combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or
 
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any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the shares sold in the Initial Public Offering, which we refer to as “Excess Shares,” without our prior consent. We believe this restriction will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed business combination as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder holding more than an aggregate of 15% of the shares sold in the Initial Public Offering could threaten to exercise its redemption rights if such holder’s shares are not purchased by us, our initial stockholders or our management at a premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem no more than 15% of the shares sold in the Initial Public Offering without our prior consent, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our Initial Business Combination, particularly in connection with a business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our Initial Business Combination.
Tendering Share Certificates in Connection with a Tender Offer or Redemption Rights
Public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” will be required to either tender their certificates (if any) to our transfer agent prior to the date set forth in the proxy solicitation or tender offer materials, as applicable, mailed to such holders, or to deliver their shares to the transfer agent electronically using The Depository Trust Company’s DWAC (Deposit/ Withdrawal At Custodian) System (the “DWAC System”), at the holder’s option, in each case up to two business days prior to the initially scheduled vote to approve the business combination. The proxy solicitation or tender offer materials, as applicable, that we will furnish to holders of our public shares in connection with our Initial Business Combination will indicate the applicable delivery requirements, which will include the requirement that a beneficial holder must identify itself in order to validly redeem its shares. Accordingly, a public stockholder would have from the time we send out our tender offer materials until the close of the tender offer period, or up to two business days prior to the initially scheduled vote on the proposal to approve the business combination if we distribute proxy materials, as applicable, to tender its shares if it wishes to seek to exercise its redemption rights. Given the relatively short period in which to exercise redemption rights, it is advisable for stockholders to use electronic delivery of their public shares.
There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the tendering broker a fee of approximately $80.00 and it would be up to the broker whether or not to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we require holders seeking to exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising redemption rights regardless of the timing of when such delivery must be effectuated.
The foregoing is different from the procedures used by many blank check companies. In order to perfect redemption rights in connection with their business combinations, many blank check companies would distribute proxy materials for the stockholders’ vote on an Initial Business Combination, and a holder could simply vote against a proposed business combination and check a box on the proxy card indicating such holder was seeking to exercise his or her redemption rights. After the business combination was approved, the company would contact such stockholder to arrange for him or her to deliver his or her certificate to verify ownership. As a result, the stockholder then had an “option window” after the completion of the business combination during which he or she could monitor the price of the company’s shares in the market. If the price rose above the redemption price, he or she could sell his or her shares in the open market before actually delivering his or her shares to the company for cancellation. As a result, the redemption rights, to which stockholders were aware they needed to commit before the stockholder meeting, would become “option” rights surviving past the completion of the
 
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business combination until the redeeming holder delivered its certificate. The requirement for physical or electronic delivery prior to the meeting ensures that a redeeming stockholder’s election to redeem is irrevocable once the business combination is approved.
Any request to redeem such shares, once made, may be withdrawn at any time up to two business days prior to the initially scheduled vote on the proposal to approve the business combination, unless otherwise agreed to by us. Furthermore, if a holder of a public share delivered its certificate in connection with an election of redemption rights and subsequently decides prior to the applicable date not to elect to exercise such rights, such holder may simply request that the transfer agent return the certificate (physically or electronically). It is anticipated that the funds to be distributed to holders of our public shares electing to redeem their shares will be distributed promptly after the completion of our Initial Business Combination. If our Initial Business Combination is not approved or completed for any reason, then our public stockholders who elected to exercise their redemption rights would not be entitled to redeem their shares for the applicable pro rata share of the Trust Account. In such case, we will promptly return any certificates delivered by public holders who elected to redeem their shares. If our initial proposed business combination is not completed, we will continue to try to complete a business combination with a different target until 24 months from the closing of our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class).
Extension of Time to Complete Business Combination
We must complete an Initial Business Combination with one or more target businesses having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (excluding the taxes payable on the income earned on the Trust Account) at the time of signing a definitive agreement in connection with the Initial Business Combination and that a majority of the independent directors approve such Initial Business Combination(s). However, we will only complete an Initial Business Combination if the post-transaction company owns or acquires 50% or more of the voting securities of the target or otherwise is not required to register as an investment company under the Investment Company Act.
After signing a definitive agreement for an Initial Business Combination, we will either (i) seek stockholder approval of the Initial Business Combination at a meeting called for such purpose in connection with which Public Stockholders may seek to redeem their Public Shares, regardless of whether they vote for or against the an Initial Business Combination or do not vote at all, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the Initial Business Combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes, or (ii) provide the Public Stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of the Initial Business Combination at $10.00 per SAIL and the per share interest earned on the funds held in the Trust Account (net of permitted withdrawals). As a result, such common stock was recorded at redemption amount and classified as temporary equity, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), ASC 480, “Distinguishing Liabilities from Equity.” The decision as to whether we will seek stockholder approval of the Initial Business Combination or will allow stockholders to sell their shares 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. If we seek stockholder approval, we will complete the initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the Initial Business Combination. However, in no event will we redeem our Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001 immediately prior to or upon consummation of an Initial Business Combination. In such case, we would not proceed with the redemption of our Public Shares and the related business combination, and instead may search for an alternate business combination.
We will only have 24 months from the closing of the Initial Public Offering to complete the Initial Business Combination, or March 22, 2023 (or such later date as approved by holders of a majority of shares of the
 
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outstanding common stock that are voted at a meeting to extend such date, voting together as a single class) (the “Business Combination Period”). If we do not complete an Initial Business Combination within this period of time (and stockholders do not approve an amendment to the amended and restated certificate of incorporation to extend this 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 the Public Shares, at a
per-share
price, payable in cash, of $10.00, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii), to our obligations under Delaware law to provide for claims of creditors and in all cases subject to the other requirements of applicable law.
Redemption of Public Shares and Liquidation If No Initial Business Combination
Our amended and restated certificate of incorporation provides that we will have only 24 months from the closing of our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class) to consummate an Initial Business Combination. If we have not consummated an Initial Business Combination within 24 months from the closing of our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class), we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes, if any (less up to $100,000 of interest to pay dissolution expenses) divided by the number of the then-outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, liquidate and dissolve, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to consummate an Initial Business Combination within 24 months from the closing of our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class). Our amended and restated certificate of incorporation provides that, if we wind up for any other reason prior to the consummation of our Initial Business Combination, we will follow the foregoing procedures with respect to the liquidation of the Trust Account as promptly as reasonably possible but not more than ten business days thereafter.
Our initial stockholders and each member of our management team have entered into an agreement with us, pursuant to which they have agreed to waive their rights to liquidating distributions from the Trust Account with respect to any alignment shares they hold if we fail to consummate an Initial Business Combination within 24 months from the closing of our Initial Public Offering, or such later date as described in the preceding paragraph (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).
Our initial stockholders, executive officers, directors and director nominees have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (A) that would modify the substance or timing of our obligation to provide holders of our shares of Class A common stock the right to have their shares redeemed in connection with our Initial Business Combination or to redeem 100% of our public shares if we do not complete our Initial Business Combination within 24 months from the closing of our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class) or (B) with respect to any other provision relating to the rights of holders of our shares of Class A common stock, unless we provide our public stockholders with the opportunity to redeem their public
 
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shares upon approval of any such amendment at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes, if any, divided by the number of the then-outstanding public shares. However, we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we do not then become 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, we would not proceed with the amendment or the related redemption of our public shares at such time. This redemption right shall apply in the event of the approval of any such amendment, whether proposed by our initial stockholders, any executive officer, director or any other person.
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the $4,500,000 of proceeds held outside the Trust Account, although we cannot assure you that there will be sufficient funds for such purpose.
If we were to expend all of the net proceeds of the Initial Public Offering and the sale of the private placement warrants, other than the proceeds deposited in the Trust Account, and without taking into account interest, if any, earned on the Trust Account, the
per-share
redemption amount received by stockholders upon our dissolution would be $10.00. The proceeds deposited in the Trust Account could, however, become subject to the claims of our creditors which would have higher priority than the claims of our public stockholders. We cannot assure you that the actual
per-share
redemption amount received by stockholders will not be less than $10.00. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims.
Although we will seek to have all vendors, service providers (except our independent registered public accounting firm), prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of our public stockholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the Trust Account including, but not limited, to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third-party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third-party that has not executed a waiver if management believes that such third-party’s engagement would be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third-party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. The underwriters will not execute an agreement with us waiving such claims to the monies held in the Trust Account. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason. In order to protect the amounts held in the Trust Account, our sponsor has agreed that it will be liable to us if and to the extent any claims by a third-party for services rendered or products sold to us (other than our independent registered public accounting firm), or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amounts in the Trust Account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account if less than $10.00 per public share due to reductions in the value of the trust assets, in each case net of the interest that may be withdrawn to pay our tax obligations; provided that such liability will not apply to any claims by a third-party or prospective target business that executed a waiver of any and all rights to seek access to the Trust Account nor will it apply to any claims under our indemnity of the underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a
 
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third-party, our sponsor will not be responsible to the extent of any liability for such third-party claims. However, we have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and we believe that our sponsor’s only assets are securities of our company. Our sponsor may not be able to satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties, including, without limitation, claims by vendors and prospective target businesses.
In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account if less than $10.00 per public share due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay our income tax obligations, and our sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so in any particular instance. Accordingly, we cannot assure you that due to claims of creditors the actual value of the
per-share
redemption price will not be less than $10.00 per public share.
We will seek to reduce the possibility that our sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except our independent registered public accounting firm), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account. Our sponsor will also not be liable as to any claims under our indemnity of the underwriter of our Initial Public Offering against certain liabilities, including liabilities under the Securities Act. We will have access to up to $4,500,000 from the proceeds of our Initial Public Offering and the sale of the private placement warrants with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $100,000). In the event that we liquidate and it is subsequently determined that the reserve for claims and liabilities is insufficient, stockholders who received funds from our Trust Account could be liable for claims made by creditors, however such liability will not be greater than the amount of funds from our Trust Account received by any such stockholder. In the event that our offering expenses exceed our estimate of $4,500,000, we may fund such excess with funds from the funds not to be held in the Trust Account. In such case, the amount of funds we intend to be held outside the Trust Account would decrease by a corresponding amount. Conversely, in the event that the offering expenses are less than our estimate of $4,500,000, the amount of funds we intend to be held outside the Trust Account would increase by a corresponding amount.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of the funds in our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our Initial Business Combination within 24 months from the closing of our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class) may be considered a liquidating distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a
60-day
notice period during which any third-party claims can be brought against the corporation, a
90-day
period during which the corporation may reject any claims brought, and an additional
150-day
waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.
Furthermore, if the pro rata portion of the funds in our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our Initial Business Combination
 
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within 24 months from the closing of our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class), is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful (potentially due to the imposition of legal proceedings that a party may bring or due to other circumstances that are currently unknown), then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution. If we do not complete our Initial Business Combination within 24 months from the closing of our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class), we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account (net of permitted withdrawals and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any) and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following our 24th month and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.
Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent 10 years. However, because we are a newly organized company established for the purpose of identifying a company to partner with in order to effectuate a merger, share exchange, asset acquisition, share purchase, reorganization or similar Initial Business Combination, rather than an operating company, and our operations will be limited to searching for prospective candidates for our Initial Business Combination to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective candidates for our Initial Business Combination. As described above, pursuant to the obligation contained in our underwriting agreement, we will seek to have all vendors, service providers (except for our independent registered public accounting firm), prospective candidates for our Initial Business Combination or other entities with which we do business (other than our independent registered public accounting firm) execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account. As a result of this obligation, the claims that could be made against us are significantly limited and the likelihood that any claim that would result in any liability extending to the Trust Account is remote. Further, our sponsor may be liable only to the extent necessary to ensure that the amounts in the Trust Account are not reduced below (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, due to reductions in value of the trust assets, in each case net of the amount of interest withdrawn to pay taxes and will not be liable as to any claims under our indemnity of the underwriter of the initial public offering final prospectus against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, our sponsor will not be responsible to the extent of any liability for such third-party claims.
If we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the Trust Account, we cannot assure you we will be able to return $10.00 per share to our public stockholders. Additionally, if we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be
 
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viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. Furthermore, our board of directors will be viewed as having breached its fiduciary duty to our creditors and/or acted in bad faith, and thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.
Our public stockholders will be entitled to receive funds from the Trust Account only (i) in the event of the redemption of our public shares if we do not complete our Initial Business Combination within 24 months from the closing of our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class), (ii) in connection with a stockholder vote to amend our amended and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our Initial Business Combination within 24 months from the closing of our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class) or with respect to any other material provisions relating to stockholders’ rights or pre- Initial Business Combination activity or (iii) if they redeem their respective shares for cash upon the completion of our Initial Business Combination. In no other circumstances will a stockholder have any right or interest of any kind to or in the Trust Account. In the event we seek stockholder approval in connection with our Initial Business Combination, a stockholder’s voting in connection with the Initial Business Combination alone will not result in a stockholder’s redeeming its shares to us for an applicable pro rata share of the Trust Account. Such stockholder must have also exercised its redemption rights described above. These provisions of our amended and restated certificate of incorporation, like all provisions of our amended and restated certificate of incorporation, may be amended with a stockholder vote.
Competition
In identifying, evaluating and selecting a target business for our Initial Business Combination, we may encounter intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, public companies, operating businesses seeking strategic acquisitions. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than us. Our ability to acquire larger target businesses will be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their redemption rights may reduce the resources available to us for our Initial Business Combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an Initial Business Combination.
Facilities
We currently maintain our executive offices at 20 University Road, Cambridge, Massachusetts 02138. The cost for our use of this space is included in the $10,000 per month fee we pay to an affiliate of our sponsor for office space, administrative and support services. We consider our current office space adequate for our current operations.
Employees
We currently have four executive officers. These individuals are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our Initial Business Combination. The amount of time they will devote in any
 
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time period will vary based on whether a target business has been selected for our Initial Business Combination and the stage of the business combination process we are in. We do not intend to have any full time employees prior to the completion of our Initial Business Combination.
Periodic Reporting and Financial Information
We have registered our SAIL
SM
securities, shares of Class A common stock and warrants 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 reports 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 the proxy solicitation or tender offer materials, as applicable, sent to stockholders. These financial statements may be required to be prepared in accordance with, or reconciled to, GAAP, or IFRS, depending on the circumstances, and the historical financial statements may be required to be audited in accordance with the standards of the PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such statements in time for us to disclose such statements in accordance with federal proxy rules and complete our Initial Business Combination within the prescribed time frame. We cannot assure you that any particular target business identified by us as a potential acquisition candidate will have financial statements prepared in accordance with the requirements outlined above, or that the potential target business will be able to prepare its financial statements in accordance with the requirements outlined above. To the extent that these requirements cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential acquisition candidates, we do not believe that this limitation will be material.
We will be required to evaluate our internal control procedures for the fiscal year ending December 31, 2022 as required by the Sarbanes-Oxley Act. Only in the event we are deemed to be a large accelerated filer or an accelerated filer and no longer qualify as an emerging growth company, will we not be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. A target business 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.
We filed a Registration Statement on Form
8-A
with the SEC to voluntarily register our securities under Section 12 of the Exchange Act. As a result, we are subject to the rules and regulations promulgated under the Exchange Act. We have no current intention of filing a Form 15 to suspend our reporting or other obligations under the Exchange Act prior or subsequent to the consummation of our Initial Business Combination.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a
non-binding
advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the
 
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adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our Initial Public Offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our shares of Class A common stock that are held by
non-affiliates
exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in
non-convertible
debt during the prior three-year period.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation
S-K.
Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by
non-affiliates
is equal to or exceeds $250 million as of the prior June 30, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by
non-affiliates
is equal to or exceeds $700 million as of the prior June 30. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.
Legal Proceedings
There is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacity as such.
 
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Item 1A.
Risk Factors
An investment in our securities involves a high degree of risk. You should consider carefully all of the risks described below, together with the other information contained in this Annual Report on Form
10-K,
before making a decision to invest in our securities. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment.
Risks Related to Our Business and Financial Position
We are a blank check company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.
We are a recently formed blank check company with no operating results. Because we lack an operating history, you have no basis upon which to evaluate our ability to achieve our business objective of completing our Initial Business Combination with one or more target businesses. We have no plans, arrangements or understandings with any prospective target business concerning a business combination and may be unable to complete our Initial Business Combination. If we fail to complete our Initial Business Combination, we will never generate any operating revenues.
Past performance by our management team or their respective affiliates may not be indicative of future performance of an investment in us.
Information regarding performance is presented for informational purposes only. Any past experience or performance of our management team and their respective affiliates, including with respect to Health Assurance Acquisition Corp. (“HAAC”) is not a guarantee of either (i) our ability to successfully identify and execute a transaction or (ii) success with respect to any business combination that we may consummate. You should not rely on the historical record of our management team or their respective affiliates, including with respect to HAAC and CPAR, as indicative of the future performance of an investment in us or the returns we will, or are likely to, generate going forward.
Certain of our directors and officers are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
Until we consummate our Initial Business Combination, we intend to engage in the business of identifying and combining with one or more businesses. Our Sponsor and directors and officers are, or may in the future become, affiliated with entities that are engaged in a similar business. For example, Mr. Taneja and Ms. Schneider have founded HAAC, a blank check company incorporated for the purpose of effecting their own Initial Business Combination. Mr. Taneja serves as the Chairman and Chief Executive Officer of HAAC, and Ms. Schneider serves as a director of HAAC. HAAC completed its Initial Public Offering in November 2020, in which it sold 52,500,000 SAIL
SM
securities, each consisting of one HAAC Class A common stock and
one-fourth
of one warrant for one HAAC Class A common stock, for an offering price of $10.00 per SAIL
SM
security, generating aggregate proceeds of $525,000,000. Mr. Taneja and Ms. Schneider owe fiduciary duties under the DGCL to HAAC. Our Sponsor and directors and officers are also not prohibited from sponsoring, investing or otherwise becoming involved with, any other blank check companies, including in connection with their Initial Business Combinations, prior to us completing our Initial Business Combination. Moreover, certain of our directors and officers have time and attention requirements for investment funds of which affiliates of our Sponsor are the investment managers.
Our directors and officers also may become aware of business opportunities which may be appropriate for presentation to us and the other entities to which they owe certain fiduciary or contractual duties, including HAAC and CPAR. Accordingly, they may have conflicts of interest in determining to which entity a particular
 
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business opportunity should be presented. These conflicts may not be resolved in our favor and a potential target business may be presented to other entities prior to its presentation to us, subject to his or her fiduciary duties under Delaware law. Our amended and restated certificate of incorporation provides that we will renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of the company and it is an opportunity that we are able to complete on a reasonable basis.
For a complete discussion of our officers’ and directors’ business affiliations and the potential conflicts of interest that you should be aware of, please see “Item 10. Directors, Executive Officers and Corporate Governance—Conflicts of Interest.”
Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by current or anticipated military conflict, including between Russia and Ukraine, terrorism, sanctions or other geopolitical events globally, the COVID 19 pandemic, including new variant strains of the underlying virus, and the status of debt and equity markets.
Our ability to consummate a business combination may be dependent on our ability to raise equity and debt financing which may be impacted by current or anticipated military conflict, including between Russia and Ukraine, terrorism, sanctions, the
COVID-19
pandemic and other events, including as a result of increased market volatility, decreased market liquidity and third-party financing being unavailable on terms acceptable to us or at all. Economic uncertainty in various global markets caused by political instability may result in weakened demand for products sold by potential target businesses and difficulty in forecasting financial results on which we rely in the evaluation of potential target businesses. Global conflicts, including the military conflict between Russia and Ukraine, as well as economic sanctions implemented by the United States and European Union against Russia in response thereto, may negatively impact markets, increase energy and transportation costs and cause weaker macro-economic conditions. Political developments impacting government spending, and international trade, including inflation or raising interest rates, may also negatively impact markets and cause weaker macro-economic conditions. The effect of any or all of these events could adversely impact our ability to find a suitable business combination, as it may affect demand for potential target companies’ products or the cost of manufacturing thereof, harm their operations and weaken their financial results.
Additionally, the
COVID-19
outbreak has resulted, and a significant outbreak of other infectious diseases could result, in a widespread health crisis that has affected, or could adversely affect, the economies and financial markets worldwide, and the business of any potential target business with which we consummate a business combination could be materially and adversely affected. The extent to which
COVID-19
impacts our search for a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new variant strains of the underlying disease that may develop, new information which may emerge concerning the severity of
COVID-19
and the actions to contain
COVID-19
or treat its impact, among others. If the disruptions posed by
COVID-19
or other matters of global concern continue for an extensive period of time, our ability to consummate a business combination or the operations of a target business with which we ultimately consummate a business combination, may be materially adversely affected. If the disruptions posed by
COVID-19
or other matters of global concern continue for an extensive period of time, our ability to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination, may be materially adversely affected.
The requirement that 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 any taxes payable) at the time of the execution of a definitive agreement for our initial business combination may limit the type and number of companies with which we may complete such a business combination.
Nasdaq rules and our amended and restated certificate of incorporation require that 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
 
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funds in the trust account (excluding any taxes payable) at the time of the execution of a definitive agreement for our initial business combination. This restriction may limit the type and number of companies that we may complete a business combination with. If we are unable to locate a target business or businesses that satisfy this fair market value test, we may be forced to liquidate and you will only be entitled to receive your pro rata portion of the funds in the trust account, which may be less than $10.00 per share.
Our stockholders may not be afforded an opportunity to vote on our proposed Initial Business Combination, which means we may complete our Initial Business Combination even though a majority of our stockholders do not support such a combination.
We may choose not to hold a stockholder vote before we complete our Initial Business Combination if the business combination would not require stockholder approval under applicable law or stock exchange listing requirement. For instance, if we were seeking to acquire a target business where the consideration we were paying in the transaction was all cash, we would typically not be required to seek stockholder approval to complete such a transaction. Except for as required by applicable law or stock exchange listing requirement, the decision as to whether we will seek stockholder approval of a proposed business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors, such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. Accordingly, we may complete our Initial Business Combination even if holders of a majority of our issued and outstanding shares of Class A common stock do not approve of the business combination we complete.
Your only opportunity to affect the investment decision regarding a potential business combination may be limited to the exercise of your right to redeem your shares from us for cash.
At the time of your investment in us, you will not be provided with an opportunity to evaluate the specific merits or risks of any target businesses. Since our board of directors may complete a business combination without seeking stockholder approval, public stockholders may not have the right or opportunity to vote on the business combination, unless we seek such stockholder approval. Accordingly, your only opportunity to affect the investment decision regarding a potential business combination may be limited to exercising your redemption rights within the period of time (which will be at least 20 business days) set forth in our tender offer documents mailed to our public stockholders in which we describe our Initial Business Combination.
Risks Related to Our Proposed Initial Business Combination
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 control 20% of the voting power of our common stock. Our initial stockholders and members of our management team also may from time to time purchase shares of Class A common stock prior to our Initial Business Combination. Our amended and restated certificate of incorporation provides that, if we seek stockholder approval, we will complete our Initial Business Combination only if a majority of the outstanding shares of common stock, represented in person or by proxy and entitled to vote thereon, voted at a stockholder meeting are voted in favor of the business combination. As a result, in addition to our initial stockholders’ Alignment Shares, we would need 20,625,001, or 37.5% of the 55,000,000 Public Shares to be voted in favor of an Initial Business Combination in order to have our Initial Business Combination approved. Accordingly, if we seek stockholder approval of our Initial Business Combination, the agreement by our initial stockholders and each member of our management team to vote in favor of our Initial Business Combination will increase the likelihood that we will receive the requisite stockholder approval for such Initial Business Combination.
 
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The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into a business combination with a target.
We may seek to enter into a business combination transaction agreement with a prospective target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. If too many public stockholders exercise their redemption rights, we would not be able to meet such closing condition and, as a result, would not be able to proceed with the business combination. Furthermore, in no event will we redeem our Public Shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we do not then become subject to the SEC’s “penny stock” rules). Consequently, if accepting all properly submitted redemption requests would cause our net tangible assets to be less than $5,000,001 or such greater amount necessary to satisfy a closing condition as described above, we would not proceed with such redemption and the related business combination and may instead search for an alternate business combination. Prospective targets will be aware of these risks and, thus, may be reluctant to enter into a business combination transaction with us.
The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure.
At the time we enter into an agreement for our Initial Business Combination, we will not know how many stockholders may exercise their redemption rights, and therefore will need to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If a large number of shares are submitted for redemption, we may need to restructure the transaction to reserve a greater portion of the cash in the Trust Account or arrange for additional third-party financing. Raising additional third-party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels. The above considerations may limit our ability to complete the most desirable business combination available to us or optimize our capital structure. The amount of the deferred underwriting commissions payable to the underwriter will not be adjusted for any shares that are redeemed in connection with an Initial Business Combination. The
per-share
amount we will distribute to stockholders who properly exercise their redemption rights will not be reduced by the deferred underwriting commission and after such redemptions, the amount held in trust will continue to reflect our obligation to pay the entire deferred underwriting commissions.
The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our Initial Business Combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your shares.
If our Initial Business Combination agreement requires us to use a portion of the cash in the Trust Account to pay the purchase price, or requires us to have a minimum amount of cash at closing, the probability that our Initial Business Combination would be unsuccessful is increased. If our Initial Business Combination is unsuccessful, you would not receive your pro rata portion of the funds in the Trust Account until we liquidate the Trust Account. If you are in need of immediate liquidity, you could attempt to sell your shares in the open market; however, at such time our shares may trade at a discount to the pro rata amount per share in the Trust Account. In either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your shares in the open market.
 
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The requirement that we consummate an Initial Business Combination within 24 months after the closing of our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class) may give potential target businesses leverage over us in negotiating a business combination and may limit the time we have in which to conduct due diligence on potential business combination targets, in particular as we approach our dissolution deadline, which could undermine our ability to complete our Initial Business Combination on terms that would produce value for our stockholders.
Any potential target business with which we enter into negotiations concerning a business combination will be aware that we must consummate an Initial Business Combination within 24 months from the closing of our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class). Consequently, such target business may obtain leverage over us in negotiating a business combination, knowing that if we do not complete our Initial Business Combination with that particular target business, we may be unable to complete our Initial Business Combination with any target business. This risk will increase as we get closer to the time frame described above. In addition, we may have limited time to conduct due diligence and may enter into our Initial Business Combination on terms that we would have rejected upon a more comprehensive investigation.
As the number of special purpose acquisition companies evaluating targets increases, attractive targets may become scarcer and there may be more competition for attractive targets. This could increase the cost of our Initial Business Combination and could even result in our inability to find a target or to consummate an Initial Business Combination.
In recent years, the number of special purpose acquisition companies that have been formed has increased substantially. Many potential targets for special purpose acquisition companies have already entered into an Initial Business Combination, and there are still many special purpose acquisition companies preparing for an Initial Public Offering, as well as many such companies currently in registration. As a result, at times, fewer attractive targets may be available to consummate an Initial Business Combination.
In addition, because there are more special purpose acquisition companies seeking to enter into an Initial Business Combination with available targets, the competition for available targets with attractive fundamentals or business models may increase, which could cause targets companies to demand improved financial terms. Attractive deals could also become scarcer for other reasons, such as economic or industry sector downturns, geopolitical tensions, or increases in the cost of additional capital needed to close business combinations or operate targets post-business combination. This could increase the cost of, delay or otherwise complicate or frustrate our ability to find and consummate an Initial Business Combination, and may result in our inability to consummate an Initial Business Combination on terms favorable to our investors altogether.
We may not be able to consummate an Initial Business Combination within 24 months of our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class), 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 may not be able to find a suitable candidate for our Initial Business Combination and complete our Initial Business Combination within 24 months of our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class). Our ability to complete our Initial Business Combination may be negatively impacted by general market conditions, volatility in the capital and debt markets and the other risks described herein. For example, as the
COVID-19
pandemic continues in the U.S. and globally and, while the extent of the impact of the pandemic on us will depend on future developments, it could limit our ability to complete our Initial Business Combination, including as a result of increased market volatility, decreased market liquidity and
 
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third-party financing being unavailable on terms acceptable to us or at all. Additionally, the
COVID-19
pandemic may negatively impact businesses we may seek to acquire. If we have not completed our Initial Business Combination within such time period, we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account (net of permitted withdrawals and up to $100,000 of interest to pay dissolution expenses),
divided by
the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, liquidate and dissolve, subject in each case, to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
If we seek stockholder approval of our Initial Business Combination, our initial stockholders, directors, executive officers, advisors and their affiliates may elect to purchase Public Shares or warrants, which may influence a vote on a proposed business combination and reduce the public “float” of our shares of Class A common stock or Public Warrants.
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 initial stockholders, directors, executive officers, advisors or their affiliates may purchase Public Shares or warrants in privately negotiated transactions or in the open market either prior to or following the completion of our Initial Business Combination, although they are under no obligation to do so. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the Trust Account will be used to purchase Public Shares or warrants in such transactions.
In the event that our initial stockholders, directors, executive officers, advisors or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. The purpose of any such transaction could be to (i) vote in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of the business combination, (ii) reduce the number of Public Warrants outstanding or vote such warrants on any matters submitted to the warrant holders for approval in connection with our Initial Business Combination or (iii) satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our Initial Business Combination, where it appears that such requirement would otherwise not be met. Any such purchases of our securities may result in the completion of our Initial Business Combination that may not otherwise have been possible. In addition, if such purchases are made, the public “float” of our shares of Class A common stock or Public Warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.
If a stockholder fails to receive notice of our offer to redeem our Public Shares in connection with our Initial Business Combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.
We will comply with the proxy rules or tender offer rules, as applicable, when conducting redemptions in connection with our Initial Business Combination. Despite our compliance with these rules, if a stockholder fails to receive our proxy solicitation or tender offer materials, as applicable, such stockholder may not become aware of the opportunity to redeem its shares. In addition, the proxy solicitation or tender offer materials, as applicable, that we will furnish to holders of our Public Shares in connection with our Initial Business Combination will
 
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describe the various procedures that must be complied with in order to validly redeem or tender Public Shares. In the event that a stockholder fails to comply with these procedures, its shares may not be redeemed. See “Item 1. Effecting Our Initial Business Combination—Tendering Share Certificates in Connection with a Tender Offer or Redemption Rights.”
You will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. Therefore, to liquidate your investment, you may be forced to sell your Public Shares or warrants, potentially at a loss.
Our public stockholders will be entitled to receive funds from the Trust Account only upon the earliest to occur of: (i) our completion of an Initial Business Combination, and then only in connection with those shares of Class A common stock that such stockholder properly elected to redeem, subject to the limitations described herein; (ii) the redemption of any Public Shares properly tendered in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to provide holders of our shares of Class A common stock the right to have their shares redeemed in connection with our Initial Business Combination or to redeem 100% of our Public Shares if we do not complete our Initial Business Combination within 24 months from our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class) or (B) with respect to any other provision relating to the rights of holders of our shares of Class A common stock; and (iii) the redemption of our Public Shares if we have not consummated an initial business within 24 months from our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class), subject to applicable law and as further described herein. Public stockholders who redeem their shares of Class A common stock in connection with a stockholder vote described in clause (ii) in the preceding sentence shall not be entitled to funds from the Trust Account upon the subsequent completion of an Initial Business Combination or liquidation if we have not consummated an Initial Business Combination within 24 months from our Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class), with respect to such shares of Class A common stock so redeemed. In no other circumstances will a public stockholder have any right or interest of any kind in the Trust Account. Holders of warrants will not have any right to the proceeds held in the Trust Account with respect to the warrants. Accordingly, to liquidate your investment, you may be forced to sell your Public Shares or warrants, potentially at a loss.
Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
Our SAIL
SM
securities, our Class A common stock and warrants are listed on the Nasdaq. While we continue to expect to meet, on a pro forma basis, the minimum initial listing standards set forth in the Nasdaq listing standards, our securities may not be, or may not continue to be, listed on the Nasdaq in the future or prior to the completion of our Initial Business Combination. In order to continue listing our securities on the Nasdaq prior to the competition of our Initial Business Combination, we must maintain certain financial, distribution and share price levels. Generally, we must maintain a minimum amount in stockholders’ equity (generally $2,500,000) and a minimum number of holders of our securities (generally 300 public holders).
Additionally, our SAIL
SM
securities will not be traded after completion of our Initial Business Combination and, in connection with our Initial Business Combination, we will be required to demonstrate compliance with the Nasdaq’s initial listing requirements, which are more rigorous than the Nasdaq’s continued listing requirements, in order to continue to maintain the listing of our securities on the Nasdaq. For instance, our share price would generally be required to be at least $4.00 per share and our stockholders’ equity would generally be required to be at least $5.0 million and we would be required to have a minimum of 300 round lot holders (with
 
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at least 50% of such round lot holders holding securities with a market value of at least $2,500). We cannot assure you that we will be able to meet those initial listing requirements at that time.
If the Nasdaq delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an
over-the-counter
market. If this were to occur, we could face significant material adverse consequences, including:
 
   
a limited availability of market quotations for our securities;
 
   
reduced liquidity for our securities;
 
   
a determination that our Class A common stock are a “penny stock” which will require brokers trading in our Class A common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
 
   
a limited amount of news and analyst coverage; and
 
   
a decreased ability to issue additional securities or obtain additional financing in the future.
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because we expect that our SAIL
SM
securities, our Class A common stock and warrants will continue to be listed on the Nasdaq, our SAIL
SM
securities, Class A common stock and warrants will qualify as covered securities under the statute. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, other than the State of Idaho, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on the Nasdaq, our securities would not qualify as covered securities under the statute, and we would be subject to regulation in each state in which we offer our securities.
You will not be entitled to protections normally afforded to investors of many other blank check companies.
Since the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants are intended to be used to complete an Initial Business Combination with a target business that has not been selected, we may be deemed to be a “blank check” company under the United States securities laws. However, because we have net tangible assets in excess of $5,000,000 and have filed 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 in blank check companies, such as Rule 419. Accordingly, investors will not be afforded the benefits or protections of those rules. Among other things, this means our SAIL
SM
securities will be immediately tradable and we will have a longer period of time to complete our Initial Business Combination than do companies subject to Rule 419. Moreover, if the Initial Public Offering were subject to Rule 419, that rule would prohibit the release of any interest earned on funds held in the Trust Account to us unless and until the funds in the Trust Account were released to us in connection with our completion of an Initial Business Combination.
If we seek stockholder approval of our Initial Business Combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of stockholders are deemed to hold in excess of 15% of our shares of Class A common stock, you will lose the ability to redeem all such shares in excess of 15% of our shares of Class A common stock.
If we seek stockholder approval of our Initial Business Combination and we do not conduct redemptions in connection with our Initial Business Combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or
 
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any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in the Initial Public Offering without our prior consent, which we refer to as the “Excess Shares.” However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our Initial Business Combination. Your inability to redeem the Excess Shares will reduce your influence over our ability to complete our Initial Business Combination and you could suffer a material loss on your investment in us if you sell Excess Shares in open market transactions. Additionally, you will not receive redemption distributions with respect to the Excess Shares if we complete our Initial Business Combination. And as a result, you will continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required to sell your shares in open market transactions, potentially at a loss.
Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our Initial Business Combination. If we have not consummated our Initial Business Combination within the required time period, our public stockholders may receive only approximately $10.00 per public share, or less in certain circumstances, on the liquidation of our Trust Account and our warrants will expire worthless.
We expect to encounter competition from other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess similar or greater technical, human and other resources to ours or more local industry knowledge than we do and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe there are numerous candidates for our Initial Business Combination we could potentially acquire with the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our ability to compete with respect to the acquisition of certain candidates for our Initial Business Combination that are sizable will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain candidates for our Initial Business Combination. Furthermore, we are obligated to offer holders of our Public Shares the right to redeem their shares for cash at the time of our Initial Business Combination in conjunction with a stockholder vote or via a tender offer. Candidates for our Initial Business Combination will be aware that this may reduce the resources available to us for our Initial Business Combination. Any of these obligations may place us at a competitive disadvantage in successfully negotiating an Initial Business Combination. If we do not complete our Initial Business Combination, our public stockholders may receive only their pro rata portion of the funds in the Trust Account that are available for distribution to public stockholders, and our warrants will expire worthless.
If the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants not being held in the Trust Account are insufficient to allow us to operate for the 24 months following the closing of the Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class), it could limit the amount available to fund our search for a target business or businesses and our ability to complete our Initial Business Combination, and we will depend on loans from our Sponsor, its affiliates or members of our management team to fund our search and to complete our Initial Business Combination.
Of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, as of December 31, 2021, the Company had approximately $3.4 million in cash and $4.1 million working capital, not taking into account taxes payable from investment income in the Trust Account, available to us to fund our working capital requirements. We believe that these funds, together with funds available from loans from our Sponsor, its affiliates or members of our management team will be sufficient to allow us to operate for at least the 24 months following the closing of the Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting
 
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together as a single class); however, we cannot assure you that our estimate is accurate, and our Sponsor, its affiliates or members of our management team are under no obligation to advance funds to us in such circumstances. Of the funds available to us, we expect to use a portion of the funds available to us to pay fees to consultants to assist us with our search for a target business. We could also use a portion of the funds as a down payment or to fund a
“no-shop”
provision (a provision in letters of intent designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we entered into a letter of intent where we paid for the right to receive exclusivity from a target business and were subsequently required to forfeit such funds (whether as a result of our breach or otherwise), we might not have sufficient funds to continue searching for, or conduct due diligence with respect to, a target business.
If we are required to seek additional capital, we would need to borrow funds from our Sponsor, its affiliates, members of our management team or other third parties to operate or may be forced to liquidate. Neither our Sponsor, members of our management team nor their affiliates is under any obligation to us in such circumstances. Any such advances may be repaid only from funds held outside the Trust Account or from funds released to us upon completion of our Initial Business Combination. Up to $1,500,000 of such loans may be convertible into warrants of the post-business combination entity at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants. Prior to the completion of our Initial Business Combination, we do not expect to seek loans from parties other than our Sponsor, its affiliates or members of our management team as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account. If we have not consummated our Initial Business Combination within the required time period because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. Consequently, our public stockholders may only receive an estimated $10.00 per public share, or possibly less, on our redemption of our Public Shares, and our warrants will expire worthless.
Subsequent to completion of our Initial Business Combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and the price of our securities, which could cause you to lose some or all of your investment.
Even if we conduct extensive due diligence on a target business with which we combine, we cannot assure you that this diligence will identify all material issues with a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business and outside of our control will not later arise. As a result of these factors, we may be forced to later write-down or
write-off
assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be
non-cash
items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming
pre-existing
debt held by a target business or by virtue of our obtaining post-combination debt financing. Accordingly, any holders who choose to retain their securities following the business combination could suffer a reduction in the value of their securities.
Such holders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation or tender offer materials, as applicable, relating to the business combination contained an actionable material misstatement or material omission.
 
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If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the
per-share
redemption amount received by stockholders may be less than $10.00 per public share.
Our placing of funds in the Trust Account may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers (except our independent registered public accounting firm), prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements, they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third-party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third-party that has not executed a waiver if management believes that such third-party’s engagement would be significantly more beneficial to us than any alternative.
Examples of possible instances where we may engage a third-party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason. Upon redemption of our Public Shares, if we have not consummated an Initial Business Combination within 24 months from the closing of the Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class), or upon the exercise of a redemption right in connection with our Initial Business Combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the ten years following redemption. Accordingly, the
per-share
redemption amount received by public stockholders could be less than the $10.00 per public share initially held in the Trust Account, due to claims of such creditors. Pursuant to a the letter agreement with our Sponsor, our Sponsor has agreed that it will be liable to us if and to the extent any claims by a third-party (other than our independent auditors) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amounts in the Trust Account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account if less than $10.00 per public share due to reductions in the value of the trust assets, in each case net of the interest that may be withdrawn to pay our tax obligations;
provided
that such liability will not apply to any claims by a third-party or prospective target business that executed a waiver of any and all rights to seek access to the Trust Account nor will it apply to any claims under our indemnity of the underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third-party, our Sponsor will not be responsible to the extent of any liability for such third-party claims.
However, we have not asked our Sponsor to reserve for such indemnification obligations, nor have we independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations and we believe that our Sponsor’s only assets are securities of our company. Therefore, we cannot assure you that our Sponsor would be able to satisfy those obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for our Initial Business Combination and redemptions could be reduced to less than $10.00 per public share. In such event, we may not be able to complete our Initial Business Combination, and you would receive such lesser amount per share in connection with any redemption of your Public Shares. None of our officers or directors will indemnify us for claims by third parties, including, without limitation, claims by vendors and prospective target businesses.
 
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Our directors may decide not to enforce the indemnification obligations of our Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to our public stockholders.
In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account if less than $10.00 per public share due to reductions in the value of the trust assets, in each case net of the interest that may be withdrawn to pay our tax obligations, and our Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties 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 public share.
The securities in which we invest the funds held in the Trust Account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the
per-share
redemption amount received by public stockholders may be less than $10.00 per share.
The proceeds held in the Trust Account will be invested only in U.S. government 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 direct U.S. government treasury obligations. While short-term U.S. government treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States. In the event that we do not to complete our Initial Business Combination or make certain amendments to our amended and restated memorandum and articles of association, our public stockholders are entitled to receive their
pro-rata
share of the proceeds held in the Trust Account, plus any interest income, net of taxes paid or payable (less, in the case we are unable to complete our Initial Business Combination, $100,000 of interest). Negative interest rates could reduce the value of the assets held in trust such that the
per-share
redemption amount received by public stockholders may be less than $10.00 per share.
We may not have sufficient funds to satisfy indemnification claims of our directors and executive officers.
We have agreed to indemnify our officers and directors to the fullest extent permitted by law. However, our officers and directors have agreed to waive any right, title, interest or claim of any kind in or to any monies in the Trust Account and to not seek recourse against the Trust Account for any reason whatsoever (except to the extent they are entitled to funds from the Trust Account due to their ownership of Public Shares). Accordingly, any indemnification provided will be able to be satisfied by us only if (i) we have sufficient funds outside of the Trust Account or (ii) we consummate an Initial Business Combination. Our obligation to indemnify our officers and directors may discourage stockholders from bringing a lawsuit against our officers or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, 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 our officers and directors pursuant to these indemnification provisions.
 
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If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of our board of directors may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our board of directors and us to claims of punitive damages.
If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing the claims of creditors.
If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the
per-share
amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the Trust Account, the
per-share
amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our Initial Business Combination.
If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:
 
   
restrictions on the nature of our investments; and
 
   
restrictions 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:
 
   
registration as an investment company with the SEC;
 
   
adoption of a specific form of corporate structure; and
 
   
reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations that we are currently not subject to.
In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading of securities and that our activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Our business will be to identify and complete a business combination and thereafter to operate the post-transaction business or assets for the long term. We do not plan to buy businesses
 
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We do not believe that our anticipated principal activities will subject us to the Investment Company Act. To this end, the proceeds held in the Trust Account may only be invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule
2a-7
promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations. Pursuant to the trust agreement, the trustee is not permitted to invest in other securities or assets. By restricting the investment of the proceeds to these instruments, and by having a business plan targeted at acquiring and growing businesses for the long-term (rather than on buying and selling businesses in the manner of a merchant bank or private equity fund), we intend to avoid being deemed an “investment company” within the meaning of the Investment Company Act. An investment in our securities is not intended for persons who are seeking a return on investments in government securities or investment securities. The Trust Account is intended as a holding place for funds pending the earliest to occur of either: (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 certificate of incorporation (A) to modify the substance or timing of our obligation to provide holders of our shares of Class A common stock the right to have their shares redeemed in connection with our Initial Business Combination or to redeem 100% of our Public Shares if we do not complete our Initial Business Combination within 24 months from the Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class) or (B) with respect to any other provision relating to the rights of holders of our shares of Class A common stock; or (iii) absent our completing an Initial Business Combination within 24 months from the Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class), our return of the funds held in the Trust Account to our public stockholders as part of our redemption of the Public Shares. If we do not invest the proceeds as discussed above, we may be deemed to be subject to the Investment Company Act. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to complete a business combination. If we have not consummated our Initial Business Combination within the required time period, our public stockholders may receive only approximately $10.00 per public share, or less in certain circumstances, on the liquidation of our Trust Account and our warrants will expire worthless.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our Initial Business Combination, and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete our Initial Business Combination, and results of operations.
If we have not consummated an Initial Business Combination within 24 months from the closing of the Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class), our public stockholders may be forced to wait beyond such period before redemption from our Trust Account.
If we have not consummated an Initial Business Combination within 24 months from the closing of the Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class), the proceeds then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes, if any (less up to $100,000 of interest to pay dissolution expenses),
 
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will be used to fund the redemption of our Public Shares, as further described herein. Any redemption of public stockholders from the Trust Account will be effected automatically by function of our amended and restated certificate of incorporation prior to any voluntary winding up. If we are required to wind up, liquidate the Trust Account and distribute such amount therein, pro rata, to our public stockholders, as part of any liquidation process, such winding up, liquidation and distribution must comply with the applicable provisions of the DGCL. In that case, investors may be forced to wait beyond 24 months from the closing of the Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class) before the redemption proceeds of our Trust Account become available to them, and they receive the return of their pro rata portion of the proceeds from our Trust Account. We have no obligation to return funds to investors prior to the date of our redemption or liquidation unless, prior thereto, we consummate our Initial Business Combination or amend certain provisions of our amended and restated certificate of incorporation, and only then in cases where investors have sought to redeem their shares of Class A common stock. Only upon our redemption or any liquidation will public stockholders be entitled to distributions if we do not complete our Initial Business Combination and do not amend certain provisions of our amended and restated certificate of incorporation. Our amended and restated certificate of incorporation provides that, if we wind up for any other reason prior to the consummation of our Initial Business Combination, we will follow the foregoing procedures with respect to the liquidation of the Trust Account as promptly as reasonably possible but not more than ten business days thereafter.
Our stockholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.
If we are forced to enter into an insolvent liquidation, any distributions received by stockholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the distribution was made, we were unable to pay our debts as they fall due in the ordinary course of business. As a result, a liquidator could seek to recover some or all amounts received by our stockholders. Furthermore, our directors may be viewed as having breached their fiduciary duties to us or our creditors and/or may have acted in bad faith, thereby exposing themselves and our company to claims, 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.
You will not be permitted to exercise your warrants unless we register and qualify the underlying shares of Class A common stock or certain exemptions are available.
If the issuance of the shares of Class A common stock upon exercise of the warrants is not registered, qualified or exempt from registration or qualification under the Securities Act and applicable state securities laws, holders of warrants will not be entitled to exercise such warrants and such warrants may have no value and expire worthless. In such event, holders who acquired their warrants as part of a purchase of SAIL
SM
securities will have paid the full SAIL
SM
securities purchase price solely for the shares of Class A common stock included in the SAIL
SM
 securities.
We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or a filing, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order.
If the shares of Class A common stock issuable upon exercise of the warrants are not registered under the Securities Act, under the terms of the warrant agreement, holders of warrants who seek to exercise their warrants will not be permitted to do so for cash and, instead, will be required to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act or another exemption.
In no event will warrants be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is
 
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registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration or qualification is available.
If our shares of Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of “covered securities” under Section 18(b)(1) of the Securities Act, we may, at our option, not permit holders of warrants who seek to exercise their warrants to do so for cash and, instead, require them to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act; in the event we so elect, we will not be required to file or maintain in effect a registration statement or register or qualify the shares underlying the warrants under applicable state securities laws, and in the event we do not so elect, we will use our best efforts to register or qualify the shares underlying the warrants under applicable state securities laws to the extent an exemption is not available.
In no event will we be required to net cash settle any warrant, or issue securities (other than upon a cashless exercise as described above) or other compensation in exchange for the warrants in the event that we are unable to register or qualify the shares underlying the warrants under the Securities Act or applicable state securities laws.
You may only be able to exercise your Public Warrants on a “cashless basis” under certain circumstances, and if you do so, you will receive fewer shares of Class A common stock from such exercise than if you were to exercise such warrants for cash.
The warrant agreement provides that in the following circumstances holders of warrants who seek to exercise their warrants will not be permitted to do so for cash and will, instead, be required to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act: (i) if the shares of Class A common stock issuable upon exercise of the warrants are not registered under the Securities Act in accordance with the terms of the warrant agreement; (ii) if we have so elected and the shares of Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of “covered securities” under Section 18(b)(1) of the Securities Act; and (iii) if we have so elected and we call the Public Warrants for redemption. If you exercise your Public Warrants on a cashless basis, you would pay the warrant exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants,
multiplied by
the excess of the “fair market value” of our shares of Class A common stock (as defined in the next sentence) over the exercise price of the warrants by (y) the fair market value. The “fair market value” is the average reported closing price of the shares of Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of exercise is received by the warrant agent or on which the notice of redemption is sent to the holders of warrants, as applicable. As a result, you would receive fewer shares of Class A common stock from such exercise than if you were to exercise such warrants for cash.
The grant of registration rights to our initial stockholders and holders of our Private Placement Warrants may make it more difficult to complete our Initial Business Combination, and the future exercise of such rights may adversely affect the market price of our shares of Class A common stock.
Pursuant to an agreement entered into concurrently with the Initial Public Offering, our initial stockholders and their permitted transferees can demand that we register the Alignment Shares and the Class A common stock into which such Alignment Shares are convertible, holders of our Private Placement Warrants and their permitted transferees can demand that we register the shares of Class A common stock and the warrants (and the shares of Class A common stock issuable upon exercise of such warrants) underlying such Private Placement Warrants, and holders of Private Placement Warrants that may be issued upon conversion of Working Capital Loans may demand that we register the shares of Class A common stock and the shares of Class A common stock issuable upon exercise of such warrants. We will bear the cost of registering these securities. The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of our Class A common stock. In addition, the existence of the registration rights may make
 
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our Initial Business Combination more costly or difficult to conclude. This is because the stockholders of the candidate for our Initial Business Combination may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the negative impact on the market price of our shares of Class A common stock that is expected when the shares of common stock owned by our initial stockholders, holders of our Private Placement Warrants, holders of our Working Capital Loans or their respective permitted transferees are registered.
Because we are neither limited to evaluating a target business in a particular industry sector nor have we selected any specific target businesses with which to pursue our Initial Business Combination, you will be unable to ascertain the merits or risks of any particular target business’s operations.
Our efforts to identify a prospective Initial Business Combination candidate will not be limited to a particular industry, sector or geographic region. While we may pursue an Initial Business Combination opportunity in any industry or sector, we intend to capitalize on the ability of our management team to identify, acquire and operate a business or businesses that can benefit from our management team’s established global relationships and operating experience. Our management team has extensive experience in identifying and executing strategic investments globally and has done so successfully in a number of sectors, including financial services. Our amended and restated certificate of incorporation will prohibit us from effectuating an Initial Business Combination solely with another blank check company or similar company with nominal operations. Because we have not yet selected or approached any specific candidate for our Initial Business Combination with respect to an Initial Business Combination, there is no basis to evaluate the possible merits or risks of any particular candidate for our Initial Business Combination’s operations, results of operations, cash flows, liquidity, financial condition or prospects. To the extent we complete our Initial Business Combination, we may be affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by the risks inherent in the business and operations of a financially unstable or a development stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular candidate for our Initial Business Combination, we cannot assure you that we will properly ascertain or assess all of the significant risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a candidate for our Initial Business Combination. We also cannot assure you that an investment in our SAIL
SM
securities will ultimately prove to be more favorable to investors than a direct investment, if such opportunity were available, in a candidate for our Initial Business Combination. Accordingly, any stockholders or warrant holders who choose to remain stockholders or warrant holders following the Initial Business Combination could suffer a reduction in the value of their securities. Such stockholders or warrant holders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation or tender offer materials, as applicable, relating to the Initial Business Combination contained an actionable material misstatement or material omission.
We may seek acquisition opportunities in industries or sectors which may or may not be outside of our management’s area of expertise.
We will consider a business combination outside of our management’s area of expertise if a business combination target is presented to us and we determine that such candidate offers an attractive acquisition opportunity for our company. Although our management will endeavor to evaluate the risks inherent in any particular business combination target, we cannot assure you that we will adequately ascertain or assess all of the significant risk factors. We also cannot assure you that an investment in our SAIL
SM
securities will not ultimately prove to be less favorable to investors in the Initial Public Offering than a direct investment, if an opportunity were available, in a business combination target. In the event we elect to pursue an acquisition outside of the areas of our management’s expertise, our management’s expertise may not be directly applicable to its evaluation
 
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or operation, and the information contained in this Quarterly Report on Form
10-Q
regarding the areas of our management’s expertise would not be relevant to an understanding of the business that we elect to acquire. As a result, our management may not be able to adequately ascertain or assess all of the significant risk factors. Accordingly, any holders who choose to retain their securities following the business combination could suffer a reduction in the value of their securities. Such holders are unlikely to have a remedy for such reduction in value.
Although we have identified general criteria and guidelines that we believe are important in evaluating prospective target businesses, we may enter into our Initial Business Combination with a target that does not meet such criteria and guidelines, and as a result, the target business with which we enter into our Initial Business Combination may not have attributes entirely consistent with our general criteria and guidelines.
Although we have identified general criteria and guidelines for evaluating prospective candidates for our Initial Business Combination, it is possible that a candidate for our Initial Business Combination with which we enter into our Initial Business Combination will not have all of these positive attributes. If we complete our Initial Business Combination with a candidate for our Initial Business Combination that does not meet some or all of these guidelines, such combination may not be as successful as a combination with a business that does meet all of our general criteria and guidelines. In addition, if we announce a prospective Initial Business Combination with a candidate for our Initial Business Combination that does not meet our general criteria and guidelines, a greater number of stockholders may exercise their redemption rights, which may make it difficult for us to meet any closing condition with a candidate for our Initial Business Combination that requires us to have a minimum net worth or a certain amount of cash. In addition, if stockholder approval of the transaction is required by law, or we decide to obtain stockholder approval for business or other legal reasons, it may be more difficult for us to attain stockholder approval of our Initial Business Combination if the candidate for our Initial Business Combination does not meet our general criteria and guidelines. If we do not complete our Initial Business Combination, our public stockholders may only receive their pro rata portion of the funds in the Trust Account that are available for distribution to public stockholders, and our warrants will expire worthless.
We are not required to obtain an opinion from an independent accounting or investment banking firm, and consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to our stockholders from a financial point of view.
Unless we complete our Initial Business Combination with an affiliated entity, we are not required to obtain an opinion from an independent accounting firm or independent investment banking firm that is a member of FINRA that the price we are paying is fair to our stockholders from a financial point of view. If no opinion is obtained, our stockholders will be relying on the judgment of our board of directors, who will determine fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed in our proxy solicitation or tender offer materials, as applicable, related to our Initial Business Combination.
We may issue additional shares of Class A common stock or preferred stock to complete our Initial Business Combination or under an employee incentive plan after completion of our Initial Business Combination. Any such issuances would dilute the interest of our stockholders and likely present other risks.
Our certificate of incorporation authorizes the issuance of up to 80,000,000 shares of Class A common stock, 19,000,000 shares of Class B common stock and 1,000,000 shares of preferred stock, par value $0.0001 per share. There are 55,000,000 shares of Class A common stock issued and outstanding and 2,750,000 shares of Class B common stock issued and outstanding.
One-tenth
of the total outstanding Alignment Shares will convert into shares of our Class A common stock in each of the ten fiscal years following our Initial Business Combination based on the Total Return on our outstanding equity capital as of the relevant measurement date above the Price Threshold. See “Description of Securities—Alignment Shares.” There are currently no shares of preferred stock issued and outstanding.
 
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We may issue a substantial number of additional shares of Class A common stock or shares of preferred stock to complete our Initial Business Combination or under an employee incentive plan after completion of our Initial Business Combination. We may also issue shares of Class A common stock upon conversion of our Class B common stock from time to time after our Initial Business Combination as a result of the conversion features of the Alignment Shares contained in our amended and restated certificate of incorporation. In addition, we may also issue shares of Class A common stock to redeem the warrants at a ratio greater than
one-to-one
at the time of our Initial Business Combination as a result of the anti-dilution provisions as set forth therein. However, our amended and restated certificate of incorporation provides, among other things, that prior to our Initial Business Combination, we may not issue additional shares that would entitle the holders thereof to (i) receive funds from the Trust Account; or (ii) vote as a class with our Public Shares (a) on any Initial Business Combination or (b) to approve an amendment to our amended and restated certificate of incorporation to (x) extend the time we have to consummate an Initial Business Combination beyond 24 months from the Initial Public Offering or (y) amend the foregoing provisions. These provisions of our amended and restated certificate of incorporation, like all provisions of our amended and restated certificate of incorporation, may be amended with a stockholder vote. The issuance of additional shares of common stock or shares of preferred stock:
 
   
may significantly dilute the equity interest of investors in our Initial Public Offering (which dilutive effect would increase as the price of our Class A common stock increases on a year-over-year basis, in respect of shares issued upon conversion of the alignment shares);
 
   
may subordinate the rights of holders of shares of Class A common stock if shares of preferred stock are issued with rights senior to those afforded shares of our Class A common stock;
 
   
could cause a change in control if a substantial number of shares of Class A common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and
 
   
may adversely affect prevailing market prices for our SAIL
SM
securities, shares of Class A common stock and/or warrants.
Subsequent to the completion of our Initial Business Combination, our Alignment Shares will be eligible for conversion into shares of our Class A common stock based on the Total Return of our outstanding equity capital. Any such issuance would dilute the interest of our stockholders and likely present other risks.
Our initial stockholders hold 2,750,000 of our Alignment Shares. Shares of our Class B common stock will automatically convert into shares of our Class A common stock from time to time after our Initial Business Combination as a result of the conversion feature of the Alignment Shares contained in our amended and restated certificate of incorporation. One tenth of the total number of outstanding Alignment Shares will convert into shares of our Class A common stock for each of the ten fiscal years following our Initial Business Combination based on the Total Return on our outstanding equity capital as of the relevant measurement date above the Price Threshold. See “Description of Securities—Alignment Shares.”
As a result of such conversion feature, we may issue a substantial number of additional shares of our Class A common stock to our initial stockholders, as the Alignment Shares are not subject to a conversion limitation in the event of increases in the VWAP of our Class A common stock. The issuance of additional shares of our Class A common stock upon the conversion of Class B common stock may significantly dilute the equity interest of investors in the Initial Public Offering, may adversely affect prevailing market prices for our Class A common stock, warrants or other outstanding equity securities and will not result in adjustment to the exercise price of our warrants.
 
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Resources could be wasted in researching Initial Business Combinations that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we do not complete our Initial Business Combination, our public stockholders may only receive their pro rata portion of the funds in the Trust Account that are available for distribution to public stockholders, and our warrants will expire worthless.
We anticipate that the investigation of each specific candidate for our Initial Business Combination and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys and others. If we decide not to complete a specific Initial Business Combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific candidate for our Initial Business Combination, we may fail to complete our Initial Business Combination for any number of reasons including those beyond our control. Any such event will result in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we do not complete our Initial Business Combination, our public stockholders may only receive their pro rata portion of the funds in the Trust Account that are available for distribution to public stockholders, and our warrants will expire worthless.
We are dependent upon our executive officers and directors and their loss could adversely affect our ability to operate.
Our operations are dependent upon a relatively small group of individuals and, in particular, our executive officers and directors. We believe that our success depends on the continued service of our officers and directors, at least until we have completed our Initial Business Combination. In addition, our executive officers and directors are not required to commit any specified amount of time to our affairs and, accordingly, will have conflicts of interest in allocating their time among various business activities, including identifying potential business combinations and monitoring the related due diligence. We do not have an employment agreement with, or
key-man
insurance on the life of, any of our directors or executive officers. The unexpected loss of the services of one or more of our directors or executive officers could have a detrimental effect on us.
Our ability to successfully effect our Initial Business Combination and to be successful thereafter will be totally dependent upon the efforts of our key personnel, some of whom may join us following our Initial Business Combination. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
Our ability to successfully effect our Initial Business Combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target business, however, cannot presently be ascertained. Although some of our key personnel may remain with the target business in senior management, director or advisory positions following our Initial Business Combination, it is likely that some or all of the management of the target business will remain in place. While we intend to closely scrutinize any individuals we engage after our Initial Business Combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements.
Our key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business combination, and a particular business combination may be conditioned on the retention or resignation of such key personnel. These agreements may provide for them to receive compensation following our Initial 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 may be able to remain with our company after the completion of our Initial Business Combination only if they are able to negotiate employment or consulting agreements in connection with the
 
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business combination. Such negotiations would take place simultaneously with the negotiation of the business combination and could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would render to us after the completion of the business combination. Such negotiations also could make such key personnel’s retention or resignation a condition to any such agreement. The personal and financial interests of such individuals may influence their motivation in identifying and selecting a target business. In addition, pursuant to an agreement entered into with our Sponsor, upon and following consummation of an Initial Business Combination, they will be entitled to nominate three individuals for election to our board of directors, as long as the Sponsor holds any securities covered by the registration and stockholder rights agreement, which is described under the section of this Annual Report on Form
10-K
entitled “Description of Securities—Registration and Stockholder Rights.”
We may have a limited ability to assess the management of a prospective target business and, as a result, may affect our Initial Business Combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company.
Our key personnel may be able to remain with our company after the completion of our Initial Business Combination only if they are able to negotiate employment or consulting agreements in connection with the Initial Business Combination. Such negotiations would take place simultaneously with the negotiation of the Initial Business Combination and could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would render to us after the completion of the Initial Business Combination. Such negotiations also could make such key personnel’s retention or resignation a condition to any such agreement. The personal and financial interests of such individuals may influence their motivation in identifying and selecting a candidate for our Initial Business Combination, subject to their fiduciary duties under Delaware law.
The officers and directors of an acquisition candidate may resign upon completion of our Initial Business Combination. The loss of a business combination target’s key personnel could negatively impact the operations and profitability of our post-combination business.
The role of an acquisition candidate’s key personnel upon the completion of our Initial Business Combination cannot be ascertained at this time. Although we contemplate that certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate following our Initial Business Combination, it is possible that members of the management of an acquisition candidate will not wish to remain in place.
Risks Related to Our Operations
Our executive officers and directors will allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to complete our Initial Business Combination.
Our executive officers and directors are not required to, and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for a business combination and their other businesses. We do not intend to have any full-time employees prior to the completion of our Initial Business Combination. Each of our executive officers is engaged in several other business endeavors for which he may be entitled to substantial compensation, and our executive officers are not obligated to contribute any specific number of hours per week to our affairs. Our independent directors also serve as officers and board members for other entities. If our executive officers’ and directors’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to our affairs which may have a negative impact on our ability to complete our Initial Business Combination. For a complete discussion of our executive officers’ and directors’ other business affairs, please see ““Item 10. Directors, Executive Officers and Corporate Governance—Conflicts of Interest.”
 
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Our officers and directors presently have, and any of them in the future may have, additional, fiduciary or contractual obligations to other entities, including other blank check companies or special purpose acquisition companies, including HAAC, and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
Following the completion of the Initial Public Offering and until we consummate our Initial Business Combination, we intend to engage in the business of identifying and combining with one or more businesses or entities. Each of our officers and directors presently has, and any of them in the future may have, additional fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity, subject to his or her fiduciary duties under the DGCL. In particular, many of our officers and directors are affiliated with ARCH Venture Management, LLC or ARCH Venture Fund XI, L.P. (as applicable, collectively, “ARCH”), General Catalyst Partners, LLC (“General Catalyst”), HAAC, our Sponsor and other companies that may be interested in investing in or acquiring in similar business targets as the company. Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor and a potential target business may be presented to another entity prior to its presentation to us, subject to their fiduciary duties under the DGCL.
In addition, our founders, directors and officers may in the future become affiliated with other blank check companies and special purpose acquisition companies that may have acquisition objectives that are similar to ours. Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor and a potential target business may be presented to such other blank check companies prior to its presentation to us, subject to our officers’ and directors’ fiduciary duties under the DGCL. Our amended and restated certificate of incorporation provides that we renounce our interest in any business combination opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of the company and it is an opportunity that we are able to complete on a reasonable basis.
In September 2020, our director Hemant Taneja and our director Jennifer Schneider founded HAAC, a blank check company incorporated for the purpose of effecting its own Initial Business Combination. Mr. Taneja serves as the Chairman and Chief Executive Officer of HAAC, and Ms. Schneider serves as a director of HAAC. HAAC completed its Initial Public Offering in November 2020, in which it sold 52,500,000 SAIL
SM
securities, each consisting of one HAAC Class A common stock and
one-fourth
of one warrant for one HAAC Class A common stock, for an offering price of $10.00 per SAIL
SM
security, generating aggregate proceeds of $525,000,000.
Other entities that our officers and directors are associated with, and in particular ARCH, General Catalyst, HAAC, our Sponsor and other companies may compete with us for acquisition opportunities and if pursued by them, we may be precluded from such opportunities. Investment ideas generated within ARCH, General Catalyst, HAAC, our Sponsor and their respective affiliates may be suitable for both us and such entities and/or current or future investment vehicles associated with our officers and directors, and such ideas may be directed to such entities rather than to us. Such opportunities may outperform any businesses we acquire. Neither such entities nor members of our management team and board of directors who are also employed by such entities have any obligation to present us with any opportunity for a potential business combination of which they become aware, unless presented to such person solely in his or her capacity as an officer or director of the company. The Sponsor and/or our officers and directors, in their capacities as employees or other entities or in their other endeavors, may be required to present potential business to other entities, before they present such opportunities to us.
For a complete discussion of our executive officers’ and directors’ business affiliations and the potential conflicts of interest that you should be aware of, please see “Item 10. Directors, Executive Officers and Corporate Governance—Conflicts of Interest” and “Item 13. Certain Relationships and Related Party Transactions, and Director Independence.”
 
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Involvement of members of our management and companies with which they are affiliated in civil disputes and litigation, governmental investigations or negative publicity unrelated to our business affairs could materially impact our ability to consummate an Initial Business Combination.
Members of our management team and companies with which they are affiliated have been, and in the future will continue to be, involved in a wide variety of business affairs, including transactions, such as sales and purchases of businesses, and ongoing operations. As a result of such involvement, members of our management and companies with which they are affiliated in have been, and may in the future be, involved in civil disputes, litigation, governmental investigations and negative publicity relating to their business affairs. Any such claims, investigations, lawsuits or negative publicity may be detrimental to our reputation and could negatively affect our ability to identify and complete an Initial Business Combination in a material manner and may have an adverse effect on the price of our securities.
Our executive officers, directors, security holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests.
In September 2020, Mr. Taneja and Ms. Schneider founded HAAC, a blank check company incorporated for the purpose of effecting its own Initial Business Combination. Mr. Taneja serves as the Chairman and Chief Executive Officer of HAAC, and Ms. Schneider serves as a director of HAAC. HAAC completed its Initial Public Offering in November 2020, in which it sold 52,500,000 SAIL
SM
securities, each consisting of one HAAC Class A common stock and
one-fourth
of one warrant for one HAAC Class A common stock, for an offering price of $10.00 per SAIL
SM
security, generating aggregate proceeds of $525,000,000.
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, although we do not intend to do so. 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. As a result, there may be substantial overlap between companies that would be a suitable business combination for us and companies that would make an attractive target for the ARCH or General Catalyst funds, or HAAC.
Our management team, in their capacities as directors, officers or employees of our Sponsor or its affiliates or in their other endeavors, may choose to present potential business combinations to the related entities described above, including HAAC, CPAR, current or future entities affiliated with or managed by ARCH or General Catalyst, our Sponsor, or third parties, before they present such opportunities to us, subject to his or her fiduciary duties under Delaware law and any other applicable fiduciary duties. Our amended and restated certificate of incorporation provides that we will renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of us and it is an opportunity that we are able to complete on a reasonable basis. Accordingly, the personal and financial interests of our directors and officers may influence their motivation in timely identifying and selecting a partner business and completing a business combination. Consequently, our directors’ and officers’ discretion in identifying and selecting a suitable partner 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 interests. If this were the case, it may be a breach of their fiduciary duties to us under Delaware law and we or our stockholders might have a claim against such individuals for infringing on our stockholders’ rights. However, neither we or our stockholders may ultimately be successful in any claim we or they may make against them for such reason.
 
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We may engage in a business combination with one or more partner businesses that have relationships with entities that may be affiliated with our sponsor, executive officers, directors or initial stockholders which may raise potential conflicts of interest.
In light of the involvement of our Sponsor, executive officers and directors with other entities, we may decide to acquire one or more businesses affiliated with our Sponsor, executive officers, directors or initial stockholders. Our directors also serve as officers and board members for other entities. Our independent directors may Sponsor, form or participate in other blank check companies similar to ours during the period in which we are seeking an Initial Business Combination. Such entities may compete with us for business combination opportunities. Although we will not be specifically focusing on, or targeting, any transaction with any affiliated entities, we would pursue such a transaction if we determined that such affiliated entity met our criteria and guidelines for a business combination and such transaction was approved by a majority of our independent and disinterested directors. Despite our agreement to obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm regarding the fairness to our company from a financial point of view of a business combination with one or more domestic or international businesses affiliated with our Sponsor, executive officers, directors or initial stockholders, potential conflicts of interest still may exist and, as a result, the terms of the business combination may not be as advantageous to our public stockholders as they would be absent any conflicts of interest.
A conflict of interest may arise from the need to obtain the consent of ARCH and General Catalyst, which own a significant interest in our Sponsor, to our business combination.
We may elect not to complete a business combination without the consent of ARCH and General Catalyst, which own a significant interest in our Sponsor. As a consequence, interests of affiliates of our Sponsor may conflict with those of the rest of our stockholders if ARCH and General Catalyst do not wish to proceed with a business combination.
Certain of members of our board of directors and management serve in similar capacities with HAAC, a blank check company and an affiliate of General Catalyst that completed its Initial Public Offering in November 2020, generating aggregate proceeds of $500 million to invest in platforms that help accelerate a system of health assurance, a new category of innovation that delivers modern consumer health experiences while decreasing the overall healthcare GDP. HAAC has not yet announced or completed its Initial Business Combination.
Since our initial stockholders will lose their entire investment in us if our Initial Business Combination is not completed (other than with respect to Public Shares they may acquire during or after the Initial Public Offering), a conflict of interest may arise in determining whether a particular business combination target is appropriate for our Initial Business Combination.
On January 11, 2021, our Sponsor paid $23,750, or approximately $0.01 per share, and the Foundation paid $1,250, or approximately $0.01 per share, in consideration of 2,731,250 and 143,750 Alignment Shares, respectively. In March 2021, our Sponsor transferred (i) 6,250 Alignment Shares to each of Kris Engskov, Catherine Friedman and Jennifer Schneider and (ii) 7,500 Alignment Shares to each of Jay Markowitz and Jeff Leiden, resulting in our Sponsor holding 2,697,500 Alignment Shares. Prior to the initial investment in the company of $25,000 by our initial stockholders for the Alignment Shares, the company had no assets, tangible or intangible. The per share price of the Alignment Shares was determined by dividing the amount contributed to the company by the number of Alignment Shares issued. The Alignment Shares will be worthless if we do not complete an Initial Business Combination. In addition, our Sponsor and certain directors of the Company have purchased, pursuant to a written agreement, 12,000,000 Private Placement Warrants, each exercisable to purchase one share of Class A common stock at $11.50 per share, subject to adjustment, at a price of $1.50 per warrant ($18,000,000 in the aggregate), in a private placement that closed simultaneously with the closing of the Initial Public Offering. If we do not consummate an initial business within 24 months from the closing of the Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding
 
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common stock that are voted at a meeting to extend such date, voting together as a single class), the Private Placement Warrants will expire worthless. The personal and financial interests of our executive officers and directors may influence their motivation in identifying and selecting a target business combination, completing an Initial Business Combination and influencing the operation of the business following the Initial Business Combination. This risk may become more acute as the
24-month
anniversary of the closing of the Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class) nears, which is the deadline for our consummation of an Initial Business Combination.
We may issue notes or other debt securities, or otherwise incur substantial debt, to complete a business combination, which may adversely affect our leverage and financial condition and thus negatively impact the value of our stockholders’ investment in us.
Although we have no commitments as of the date of this Annual Report on Form
10-K
to issue any notes or other debt securities, or to otherwise incur outstanding debt, we may choose to incur substantial debt to complete our Initial Business Combination. We and our officers have agreed that we will not incur any indebtedness unless we have obtained from the lender a waiver of any right, title, interest or claim of any kind in or to the monies held in the Trust Account. As such, no issuance of debt will affect the
per-share
amount available for redemption from the Trust Account. Nevertheless, the incurrence of debt could have a variety of negative effects, including:
 
   
default and foreclosure on our assets if our operating revenues after an Initial Business Combination are insufficient to repay our debt obligations;
 
   
acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
 
   
our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand;
 
   
our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding;
 
   
our inability to pay dividends on our shares of Class A common stock;
 
   
using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our shares of Class A common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;
 
   
limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
 
   
increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and
 
   
limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.
We may only be able to complete one business combination with the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, which will cause us to be solely dependent on a single business which may have a limited number of products or services. This lack of diversification may negatively impact our operations and profitability.
The net proceeds from the Initial Public Offering and the sale of the Private Placement Warrants have provided us with approximately $536.9 million that we may use to complete our Initial Business Combination (after taking into account current liabilities and the $19,250,000 of deferred underwriting commissions being held in the Trust Account and the estimated expenses of the Initial Public Offering).
 
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We may effectuate our Initial Business Combination with a single-target business or multiple-target businesses simultaneously or within a short period of time. However, we may not be able to effectuate our Initial Business Combination with more than one target business because of various factors, including the existence of complex accounting issues and the requirement that we prepare and file pro forma financial statements with the SEC that present operating results and the financial condition of several target businesses as if they had been operated on a combined basis. By completing our Initial Business Combination with only a single entity, our lack of diversification may subject us to numerous economic, competitive and regulatory developments. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several business combinations in different industries or different areas of a single industry. Accordingly, the prospects for our success may be:
 
   
solely dependent upon the performance of a single business, property or asset; or
 
   
dependent upon the development or market acceptance of a single or limited number of products, processes or services.
This lack of diversification may subject us to numerous economic, competitive and regulatory risks, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to our Initial Business Combination.
We may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to complete our Initial Business Combination and give rise to increased costs and risks that could negatively impact our operations and profitability.
If we determine to simultaneously acquire several businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other business combinations, which may make it more difficult for us, and delay our ability, to complete our Initial Business Combination. With multiple business combinations, we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies in a single operating business. If we are unable to adequately address these risks, it could negatively impact our profitability and results of operations.
We may attempt to complete our Initial Business Combination with a private company about which little information is available, which may result in a business combination with a company that is not as profitable as we suspected, if at all.
In pursuing our acquisition strategy, we may seek to effectuate our Initial Business Combination with a privately held company. Very little public information generally exists about private companies, and we could be required to make our decision on whether to pursue a potential Initial Business Combination on the basis of limited information, which may result in a business combination with a company that is not as profitable as we suspected, if at all.
Our management may not be able to maintain control of a target business after our Initial Business Combination. Upon the loss of control of a target business, new management may not possess the skills, qualifications or abilities necessary to profitably operate such business.
We may structure our Initial Business Combination so that the post-business combination company in which our public stockholders own shares will own less than 100% of the equity interests or assets of a target business, but we will only complete such business combination if the post-business combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for us not to be required to register as an investment company under the Investment Company Act. We will not consider any transaction that does not meet such criteria. Even if the post-
 
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business combination company owns 50% or more of the voting securities of the target, our stockholders prior to our Initial Business Combination may collectively own a minority interest in the post-business combination company, depending on valuations ascribed to the target and us in the business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares of Class A common stock in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% interest in the target. However, as a result of the issuance of a substantial number of new shares of Class A common stock, our stockholders immediately prior to such transaction could own less than a majority of our outstanding shares of Class A common stock subsequent to such transaction. In addition, other minority stockholders may subsequently combine their holdings resulting in a single person or group obtaining a larger share of the company’s shares than we initially acquired. Accordingly, this may make it more likely that our management will not be able to maintain control of the target business.
We may seek business combination opportunities with a high degree of complexity that require significant operational improvements, which could delay or prevent us from achieving our desired results.
We may seek business combination opportunities with large, highly complex companies that we believe would benefit from operational improvements. While we intend to implement such improvements, to the extent that our efforts are delayed or we are unable to achieve
To the extent we complete our Initial Business Combination with a large complex business or entity with a complex operating structure, we may also be affected by numerous risks inherent in the operations of the business with which we combine, which could delay or prevent us from implementing our strategy. Although our management team will endeavor to evaluate the risks inherent in a particular target business and its operations, we may not be able to properly ascertain or assess all of the significant risk factors until we complete our business combination. If we are not able to achieve our desired operational improvements, or the improvements take longer to implement than anticipated, we may not achieve the gains that we anticipate. Furthermore, some of these risks and complexities may be outside of our control and leave us with no ability to control or reduce the chances that those risks and complexities will adversely impact a target business. Such combination may not be as successful as a combination with a smaller, less complex organization.
We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete our Initial Business Combination with which a substantial majority of our stockholders do not agree.
Our amended and restated certificate of incorporation does not provide a specified maximum redemption threshold, except that in no event will we redeem our Public Shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we do not then become subject to the SEC’s “penny stock” rules). As a result, we may be able to complete our Initial Business Combination even though a substantial majority of our public stockholders do not agree with the transaction and have redeemed their shares or, if we seek stockholder approval of our Initial Business Combination and do not conduct redemptions in connection with our Initial Business Combination pursuant to the tender offer rules, have entered into privately negotiated agreements to sell their shares to our initial stockholders, officers, directors, advisors or their affiliates. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption
plus
any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, all shares of Class A common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.
 
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In order to effectuate an Initial Business Combination, blank check companies have, in the recent past, amended various provisions of their charters and other governing instruments, including their warrant agreements. We cannot assure you that we will not seek to amend our amended and restated certificate of incorporation or governing instruments in a manner that will make it easier for us to complete our Initial Business Combination that our stockholders may not support.
In order to effectuate a business combination, special purpose acquisition companies have, in the recent past, amended various provisions of their charters and governing instruments, including their warrant agreements. For example, special purpose acquisition companies have amended the definition of business combination, increased redemption thresholds and extended the time to consummate a business combination and, with respect to their warrants, amended their warrant agreements to require the warrants to be exchanged for cash and/or other securities. Amending our amended and restated certificate of incorporation will require the approval of holders of 51% of our common stock, and amending our warrant agreement will require a vote of holders of at least 50% of the Public Warrants that vote on such amendment and, solely with respect to any amendment to the terms of the private placement SAIL
SM
securities or any provision of the warrant agreement with respect to the private placement SAIL
SM
securities, 50% of the number of the then outstanding private placement SAIL
SM
securities. In addition, our amended and restated certificate of incorporation requires us to provide our public stockholders with the opportunity to redeem their Public Shares for cash if we propose an amendment to our amended and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our Public Shares if we do not complete a business combination within 24 months of the closing of the Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class) or with respect to any other material provisions relating to stockholders’ rights or business combination transaction activity. To the extent any of such amendments would be deemed to fundamentally change the nature of the securities offered through this registration statement, we would register, or seek an exemption from registration for, the affected securities. We may seek to amend our charter or governing instruments or extend the time to consummate a business combination in order to effectuate our business combination.
The provisions of our amended and restated certificate of incorporation that relate to our
pre-business
combination activity (and corresponding provisions of the agreement governing the release of funds from our Trust Account) may be amended with the approval of holders of at least 65% of our common stock, which is a lower amendment threshold than that of some other blank check companies. It may be easier for us, therefore, to amend our amended and restated certificate of incorporation to facilitate the completion of an Initial Business Combination that some of our stockholders may not support.
Some other blank check companies have a provision in their charter which prohibits the amendment of certain of its provisions, including those which relate to a company’s
pre-business
combination activity, without approval by a certain percentage of the company’s stockholders. In those companies, amendment of these provisions typically requires approval by 90% of the company’s stockholders attending and voting at an annual meeting. Our amended and restated certificate of incorporation provides that any of its provisions related to
pre-business
combination activity (including the requirement to deposit proceeds of the Initial Public Offering and the private placement of warrants into the Trust Account and not release such amounts except in specified circumstances, and to provide redemption rights to public stockholders as described herein) may be amended if approved by holders of 65% of our common stock entitled to vote thereon and corresponding provisions of the trust agreement governing the release of funds from our Trust Account may be amended if approved by holders of at least 65% of our common stock entitled to vote thereon. In all other instances, our amended and restated certificate of incorporation may be amended by holders of a majority of our outstanding shares of common stock entitled to vote thereon, subject to applicable provisions of the DGCL or applicable stock exchange rules. Our initial stockholders and their permitted transferees, if any, who will collectively beneficially own 20% of the voting power of our common stock immediately following the completion of the Initial Public Offering (assuming they do not purchase any SAIL
SM
securities in the Initial Public Offering), will participate in any vote to amend our amended and restated certificate of incorporation and/or trust agreement and will have the
 
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discretion to vote in any manner they choose. As a result, we may be able to amend the provisions of our amended and restated certificate of incorporation which govern our
pre-business
combination behavior more easily than some other blank check companies, and this may increase our ability to complete a business combination with which you do not agree. Our stockholders may pursue remedies against us for any breach of our amended and restated certificate of incorporation.
Our initial stockholders, 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 certificate of incorporation that would affect the substance or timing of our obligation to allow redemption in connection with our Initial Business Combination or to redeem 100% of our Public Shares if we do not complete an Initial Business Combination within 24 months from the closing of the Initial Public Offering (or such later date as approved by holders of a majority of shares of our outstanding common stock that are voted at a meeting to extend such date, voting together as a single class), unless we provide our public stockholders with the opportunity to redeem their Class A common stock upon approval of any such amendment at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes, if any (less up to $100,000 of interest to pay dissolution expenses)
divided by
the number of then outstanding Public Shares. These agreements are contained in letter agreements that we have entered into with our initial stockholders, directors and each member of our management team. Our stockholders are not parties to, or third-party beneficiaries of, these agreements and, as a result, will not have the ability to pursue remedies against our initial stockholders, executive officers or directors for any breach of these agreements. As a result, in the event of a breach, our stockholders would need to pursue a stockholder derivative action, subject to applicable law.
Certain agreements related to the Initial Public Offering may be amended without stockholder approval.
Certain agreements, including the letter agreement among us and our initial stockholders, officers and directors and the registration rights agreement among us and our initial stockholders, may be amended without stockholder approval. These agreements contain various provisions that our public stockholders might deem to be material. While we do not expect our board of directors to approve any amendment to any of these agreements prior to our Initial Business Combination, it may be possible that our board of directors, in exercising its business judgment and subject to its fiduciary duties, chooses to approve one or more amendments to any such agreement in connection with the consummation of our Initial Business Combination. Any such amendments would not require approval from our stockholders, may result in the completion of our Initial Business Combination that may not otherwise have been possible, and may have an adverse effect on the value of an investment in our securities.
We may be unable to obtain additional financing to complete our Initial Business Combination or to fund the operations and growth of a target business, which could compel us to restructure or abandon a particular business combination. If we do not complete our Initial Business Combination, our public stockholders may only receive their pro rata portion of the funds in the Trust Account that are available for distribution to public stockholders, and our warrants will expire worthless.
Although we believe that the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants will be sufficient to allow us to complete our Initial Business Combination, because we have not yet selected any prospective target business we cannot ascertain the capital requirements for any particular transaction. If the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants prove to be insufficient, either because of the size of our Initial Business Combination, the depletion of the available net proceeds in search of a target business, the obligation to redeem for cash a significant number of shares from stockholders who elect redemption in connection with our Initial Business Combination or the terms of negotiated transactions to purchase shares in connection with our Initial Business Combination, we may be required to seek additional financing or to abandon the proposed business combination. We cannot assure you that such financing will be available on acceptable terms, if at all. The current economic environment may make
 
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it difficult for companies to obtain acquisition financing. To the extent that additional financing proves to be unavailable when needed to complete our Initial Business Combination, we would be compelled to either restructure the transaction or abandon that particular business combination and seek an alternative target business candidate. If we have not consummated our Initial Business Combination within the required time period, our public stockholders may receive only approximately $10.00 per public share, or less in certain circumstances, on the liquidation of our Trust Account and our warrants will expire worthless. In addition, even if we do not need additional financing to complete our Initial Business Combination, we may require such financing to fund the operations or growth of the target business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the target business. None of our officers, directors or stockholders is required to provide any financing to us in connection with or after our Initial Business Combination.
Our initial stockholders control a substantial interest in us and thus may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support.
Our initial stockholders, with their Alignment Shares, hold approximately 20% of the voting power of our common stock prior to the completion of an Initial Business Combination. In addition, the Alignment Shares, all of which are held by our initial stockholders, will entitle the holders to elect all of our directors prior to our Initial Business Combination. Following the completion of our Initial Business Combination, the Alignment Shares will be entitled to one vote per share. Accordingly, they may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support, including amendments to our amended and restated certificate of incorporation. Further, pursuant to a letter agreement with our Sponsor, we have agreed not to enter into a definitive agreement regarding an Initial Business Combination without the prior written consent of our Sponsor. As a result, we may not be permitted to enter into an Initial Business Combination that our Board believes to be in the stockholders’ best interests. Further, for so long as any Alignment Shares remain outstanding, we may not, without the prior or written consent of the holders of a majority of the Alignment Shares then outstanding, voting separately as a single class, (i) amend, alter or repeal any provision of our amended and restated certificate of incorporation, whether by merger, consolidation or otherwise, if such amendment, alteration or repeal would alter or change the powers, preferences or relative, participating, optional or other or special rights of our Class B Shares, (ii) change our fiscal year, (iii) increase the number of directors on the Board, (iv) pay any dividends or effect any split on any of our capital stock or make any distributions of cash, securities or any other property, (v) adopt any stockholder rights plan, (vi) acquire any entity or business with assets at a purchase price greater than 10% or more of our total assets measured in accordance with generally accepted accounting principles in the United States or the accounting standards then used by us in the preparation of our financial statements, (vii) issue any shares of Class A common stock in excess of 5% of our Class A common stock outstanding at the closing of the Initial Public Offering or that would otherwise require a stockholder vote pursuant to the rules of the stock exchange on which the Class A shares are then listed, (viii) make a rights offering to all or substantially all holders of any class of our common stock or (ix) issue additional Class B shares. As a result, the holders of the Alignment Shares may be able to prevent us from taking such actions that the Board believes is in our interest.
If our initial stockholders purchase any SAIL
SM
securities in the Initial Public Offering or if our initial stockholders purchase any additional shares of Class A common stock in the aftermarket or in privately negotiated transactions, this would increase their control. Neither our initial stockholders nor, to our knowledge, any of our officers or directors, have purchased or have any current intention to purchase additional securities, other than as disclosed in this Annual Report on Form
10-K.
Factors that would be considered in making such additional purchases would include consideration of the current trading price of our shares of Class A common stock. In addition, our board of directors, whose members were elected by our Sponsor, is and will be divided into three classes, each of which will generally serve for a terms for three years with only one class of directors being elected in each year. We may not hold an annual meeting of stockholders to elect new directors prior to the completion of our Initial Business Combination, in which case all of the current directors will continue in office until at least the completion of the Initial Business Combination. If there is an annual meeting, as a consequence
 
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of our “staggered” board of directors, only a minority of the board of directors will be considered for election and our initial stockholders, 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 completion of our Initial Business Combination.
Our initial stockholders contributed $25,000, or approximately $0.001 per Alignment share, and, accordingly, holders of our Class A common stock have experienced substantial dilution and may experience further substantial dilution.
The difference between the public price per share (allocating all of the SAIL
SM
securities purchase price to the share of Class A common stock and none to the warrant included in the SAIL
SM
securities) and the pro forma net tangible book value per share of Class A common stock after the Initial Public Offering constitutes the dilution to you and the other investors in the Initial Public Offering. Our initial stockholders acquired the Alignment Shares at a nominal price, significantly contributing to this dilution. Upon closing of the Initial Public Offering, and assuming no value is ascribed to the warrants included in the SAIL
SM
securities, you and the other public stockholders incurred an immediate and substantial dilution of approximately 88.4% (or $8.84 per share), the difference between the pro forma net tangible book value per share of $1.16 and the initial offering price of $10.00 per SAIL
SM
securities. This dilution would increase to the extent that the anti-dilution provisions of the Alignment Shares result in the issuance of shares of Class A common stock on a greater than
one-to-one
basis upon conversion of the Alignment Shares at the time of our Initial Business Combination and would become exacerbated to the extent that public stockholders seek redemptions from the trust for their Public Shares. In addition, because of the anti-dilution protection in the Alignment Shares, any equity or equity-linked securities issued in connection with our Initial Business Combination would be disproportionately dilutive to our shares of Class A common stock.
We may amend the terms of the warrants in a manner that may be adverse to holders of Public Warrants. As a result, the exercise price of your warrants could be increased, the exercise period could be shortened and the number of shares of Class A common stock purchasable upon exercise of a warrant could be decreased, all without your approval.
Our warrants will be issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder for the purpose of (i) curing any ambiguity or to correct any defective provision or mistake, including to conform the provisions of the warrant agreement to the description of the terms of the warrants and the warrant agreement, (ii) adjusting the provisions relating to cash dividends on shares of common stock as contemplated by and in accordance with the warrant agreement or (iii) adding or changing any provisions with respect to matters or questions arising under the warrant agreement as the parties to the warrant agreement may deem necessary or desirable and that the parties deem to not adversely affect the rights of the registered holders of the warrants;
provided
that the approval by the holders of at least 50% of the then-outstanding Public Warrants is required to make any change that adversely affects the interests of the registered holders of Public Warrants. Accordingly, we may amend the terms of the Public Warrants in a manner adverse to a holder provided 50% of the holders of the then outstanding Public Warrants that vote on such amendment approve of such amendment, after at least 10 days’ notice that an amendment is being sought. Although our ability to amend the terms of the Public Warrants with the consent of at least 50% of the then outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash or stock (at a ratio different than initially provided), shorten the exercise period or decrease the number of shares of Class A common stock purchasable upon exercise of a warrant.
 
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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 the outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant,
provided
that the closing price of our shares of Class A common stock equals or exceeds $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant) for any 20 trading days within a 30
trading-day
period ending on the third trading day prior to proper notice of such redemption and
provided
that certain other conditions are met. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. As a result, we may redeem the warrants as set forth above even if the holders are otherwise unable to exercise the warrants. Redemption of the outstanding warrants could force you to (i) exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, we expect would be substantially less than the market value of your warrants. In addition, we have the ability to redeem the outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption
provided
that the closing price of our shares of Class A common stock equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant) for any 20 trading days within a 30
trading-day
period ending on the third trading day prior to proper notice of such redemption and
provided
that certain other conditions are met, including that holders will be able to exercise their warrants prior to redemption for a number of shares of Class A common stock determined based on the redemption date and the fair market value of our Class A common stock. The value received upon exercise of the warrants (1) may be less than the value the holders would have received if they had exercised their warrants at a later time where the underlying share price is higher and (2) may not compensate the holders for the value of the warrants, including because the number of shares of common stock received is capped at 0.361 Class A common stock per warrant (subject to adjustment) irrespective of the remaining life of the warrants.
None of the Private Placement Warrants will be redeemable by us as (except in certain circumstances when the Public Warrants are called for redemption and a certain price per share of Class A Common Stock threshold is met) so long as they are held by our Sponsor or its permitted transferees.
Our warrants may have an adverse effect on the market price of our shares of Class A common stock and make it more difficult to effectuate our Initial Business Combination.
We issued warrants to purchase 11,000,000 shares of our Class A common stock as part of the SAIL
SM
securities offered in the Initial Public Offering and, simultaneously with the closing of the Initial Public Offering, we issued a private placement for 12,000,000 Private Placement Warrants, each whole Private Placement Warrant exercisable to purchase one share of Class A common stock at $11.50 per share. In addition, if our Sponsor or an affiliate of our Sponsor or certain of our officers and directors makes any Working Capital Loans, such lender may convert those loans into up to an additional 1,000,000 Private Placement Warrants, at the price of $1.50 per private placement warrant. To the extent we issue common stock to effectuate a business transaction, the potential for the issuance of a substantial number of additional shares of Class A common stock upon exercise of these warrants could make us a less attractive acquisition vehicle to a candidate for our Initial Business Combination. Such warrants, when exercised, will increase the number of issued and outstanding shares of Class A common stock and reduce the value of the shares of Class A common stock issued to complete the business transaction. Therefore, our warrants may make it more difficult to effectuate a business transaction or increase the cost of acquiring the candidate for our Initial Business Combination.
 
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Because each SAIL
SM
security contains
one-fifth
of one redeemable warrant and only a whole warrant may be exercised, the SAIL
SM
securities may be worth less than units of other blank check companies.
Each SAIL
SM
security contains
one-fifth
of one redeemable warrant. Pursuant to the warrant agreement, no fractional warrants will be issued upon separation of the SAIL
SM
securities, and only whole SAIL
SM
securities will trade. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number the number of shares of Class A common stock to be issued to the warrant holder. This is different from other offerings similar to ours whose units include one share of Class A common stock and one whole warrant to purchase one whole share. We have established the components of the SAIL
SM
securities in this way in order to reduce the dilutive effect of the warrants upon completion of a business combination since the warrants will be exercisable in the aggregate for
one-fifth
of the number of shares compared to SAIL
SM
securities that each contain a whole warrant to purchase one whole share, thus making us, we believe, a more attractive merger partner for target businesses. Nevertheless, this SAIL
SM
securities structure may cause our SAIL
SM
securities to be worth less than if a SAIL
SM
securities included a warrant to purchase one whole share.
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 Class A 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 of common stock, (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 prices will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 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.
The determination of the offering price of our SAIL
SM
securities and the size of the Initial Public Offering was more arbitrary than the pricing of securities and size of an offering of an operating company in a particular industry. You may have less assurance, therefore, that the offering price of our SAIL
SM
securities properly reflects the value of such SAIL
SM
securities than you would have in a typical offering of an operating company.
Prior to the Initial Public Offering there had been no public market for any of our securities. The public offering price of the SAIL
SM
securities and the terms of the warrants were negotiated between us and the underwriter. In determining the size of the Initial Public Offering, management held customary organizational meetings with the underwriter, both prior to our inception and thereafter, with respect to the state of capital markets, generally, and the amount the underwriter believed it reasonably could raise on our behalf. Factors considered in determining the size of the Initial Public Offering, prices and terms of the SAIL
SM
securities, including the shares of Class A common stock and warrants underlying the SAIL
SM
securities, include:
 
   
the history and prospects of companies whose principal business is the acquisition of other companies;
 
   
prior offerings of those companies;
 
   
our prospects for acquiring an operating business at attractive values;
 
   
a review of
debt-to-equity
ratios in leveraged transactions;
 
   
our capital structure;
 
   
an assessment of our management and their experience in identifying operating companies;
 
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general conditions of the securities markets at the time of our Initial Public Offering; and
 
   
other factors as were deemed relevant.
Although these factors were considered, the determination of our Initial Public Offering price was more arbitrary than the pricing of securities of an operating company in a particular industry since we have no historical operations or financial results.
Because we must furnish our stockholders with target business financial statements, we may lose the ability to complete an otherwise advantageous Initial Business Combination with some prospective target businesses.
The federal proxy rules require that a proxy statement with respect to a vote on a business combination meeting certain financial significance tests include historical and/or pro forma financial statement disclosure in periodic reports. We will include the same financial statement disclosure in connection with our tender offer documents, whether or not they are required under the tender offer rules. These financial statements may be required to be prepared in accordance with, or be reconciled to, accounting principles generally accepted in the United States of America, or GAAP, or international financial reporting standards as issued by the International Accounting Standards Board, or IFRS, depending on the circumstances and the historical financial statements may be required to be audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such statements in time for us to disclose such statements in accordance with federal proxy rules and complete our Initial Business Combination within the prescribed time frame.
We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to “emerging growth companies” or “smaller reporting companies,” this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our shares of Class A common stock held by
non-affiliates
exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging
growth companies but any such an election to opt out is irrevocable.
We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging
 
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growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation
S-K.
Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our shares of common stock held by
non-affiliates
is equal to or exceeds $250 million as of the prior June 30th, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our shares of common stock held by
non-affiliates
is equal to or exceeds $700 million as of the prior June 30. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.
Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate a business combination, require substantial financial and management resources, and increase the time and costs of completing an acquisition.
Section 404 of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls beginning with our Annual Report on Form
10-K
for the year ending December 31, 2022. Only in the event we are deemed to be a large accelerated filer or an accelerated filer and no longer qualify as an emerging growth company, will we not be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies because a target business with which we seek to complete our Initial Business Combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development of the internal control of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.
Provisions in our amended and restated certificate of incorporation may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our shares of Class A common stock and could entrench management.
Our amended and restated certificate of incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions include a staggered board of directors, the ability of the board of directors to designate the terms of and issue new series of preferred stock, and potential payments owed with respect to our Alignment Shares, which may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
Provisions in our amended and restated certificate of incorporation and Delaware law may have the effect of discouraging lawsuits against our directors and officers.
Our amended and restated certificate of incorporation requires, unless we consent in writing to the selection of an alternative forum, that (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee to us or our stockholders, (iii) any action asserting a claim against us, our directors, officers or employees arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or bylaws, or (iv) any action asserting a claim against us, our directors, officers or employees governed by the internal affairs doctrine may be brought only in the Court of Chancery in the State of Delaware, except any claim (A) as to which the Court of Chancery of the State of Delaware determines that there is an indispensable party not subject to the jurisdiction
 
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of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, and (C) for which the Court of Chancery does not have subject matter jurisdiction. If an action is brought outside of Delaware, 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 us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, a court may determine that this provision is unenforceable, and to the extent it is enforceable, 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.
Unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. A court may determine that this provision is unenforceable, and to the extent it is enforceable, 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.
Notwithstanding the foregoing, our amended and restated certificate of incorporation provides that the exclusive forum provision will not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. 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.
Our warrant agreement designates the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of our warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with our company.
Our warrant agreement provides that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating in any way to the warrant agreement, including under the Securities Act, be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to such jurisdiction, which jurisdiction shall be the exclusive forum for any such action, proceeding or claim. We will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.
Notwithstanding the foregoing, these provisions of the warrant agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any of our warrants shall be deemed to have notice of and to have consented to the forum provisions in our warrant agreement. If any action, the subject matter of which is within the scope the forum provisions of the warrant agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a “foreign action”) in the name of any holder of our warrants, such holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder.
This
choice-of-forum
provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with our company, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our warrant agreement inapplicable or unenforceable with respect to one or more of
 
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the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.
Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss.
We depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or 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 sufficiently protected against such occurrences. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our business and lead to financial loss.
Since only holders of our Alignment Shares will have the right to vote on the election of directors, Nasdaq may consider us to be a “controlled company” within the meaning of the Nasdaq rules and, as a result, we may qualify for exemptions from certain corporate governance requirements.
After completion of the Initial Public Offering, only holders of our Alignment Shares will have the right to vote on the election of directors. As a result, Nasdaq may consider us to be a “controlled company” within the meaning of the Nasdaq corporate governance standards. Under the Nasdaq corporate governance standards, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirements that:
 
   
we have a board that includes a majority of “independent directors,” as defined under the rules of Nasdaq;
 
   
we have a compensation committee of our board that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
 
   
we have a nominating and corporate governance committee of our board that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
We do not intend to utilize these exemptions and intend to comply with the corporate governance requirements of Nasdaq, subject to applicable
phase-in
provisions. However, if we determine in the future to utilize some or all of these exemptions, you will not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.
An investment in us may result in uncertain or adverse U.S. federal income tax consequences.
An investment in us may result in uncertain U.S. federal income tax consequences. For instance, because there are no authorities that directly address instruments similar to the SAIL
SM
securities we are have issued in the Initial Public Offering, the allocation an investor makes with respect to the purchase price of a SAIL
SM
security between the Class A common stock and the
one-fifth
of a warrant to purchase one share of Class A common stock included in each SAIL
SM
security could be challenged by the Internal Revenue Service or courts. In addition, it is unclear whether the conversion of Alignment Shares into shares of our common stock could result in a constructive distribution to holders of shares of our Class A common stock. Furthermore, the U.S. federal income tax consequences of a cashless exercise of warrants included in the SAIL
SM
securities we are
 
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issuing in the Initial Public Offering is unclear under current law. Finally, it is unclear whether the redemption rights with respect to our common stock suspend the running of a U.S. Holder’s (as defined in U.S. Code of Federal Regulations) holding period for purposes of determining whether any gain or loss recognized by such holder on the sale or exchange of Class A common stock is long-term capital gain or loss and for determining whether any dividend we pay would be considered “qualified dividends” for U.S. federal income tax purposes. Prospective investors are urged to consult their tax advisors with respect to these and other tax consequences when purchasing, holding or disposing of our SAIL
SM
securities.
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 adversely affect us.
If we pursue a candidate for our Initial Business Combination with operations or opportunities outside of the United States for our Initial Business Combination, we may face additional burdens in connection with investigating, agreeing to and completing such Initial Business Combination, and if we effect such Initial Business Combination, we would be subject to a variety of additional risks that may negatively impact our operations.
If we pursue a candidate for our Initial Business Combination with operations or opportunities outside of the United States for our Initial Business Combination, we would be subject to risks associated with cross-border Initial Business Combinations, including in connection with investigating, agreeing to and completing our Initial Business Combination, conducting due diligence in a foreign jurisdiction, having such transaction approved by any local governments, regulators or agencies and changes in the purchase price based on fluctuations in foreign exchange rates.
If we effect our Initial Business Combination with such a company, we would be subject to any special considerations or risks associated with companies operating in an international setting, including any of the following:
 
   
costs and difficulties inherent in managing cross-border business operations;
 
   
rules and regulations regarding currency redemption;
 
   
complex corporate withholding taxes on individuals;
 
   
laws governing the manner in which future business combinations may be effected;
 
   
exchange listing and/or delisting requirements;
 
   
tariffs and trade barriers;
 
   
regulations related to customs and import/export matters;
 
   
local or regional economic policies and market conditions;
 
   
unexpected changes in regulatory requirements;
 
   
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;
 
   
underdeveloped or unpredictable legal or regulatory systems;
 
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corruption;
 
   
protection of intellectual property;
 
   
social unrest, crime, strikes, riots and civil disturbances;
 
   
regime changes and political upheaval;
 
   
terrorist attacks, natural disasters and wars; and
 
   
deterioration of political relations with the United States.
We may not be able to adequately address these additional risks. If we were unable to do so, we may be unable to complete such Initial Business Combination, or, if we complete such combination, our operations might suffer, either of which may adversely impact our business, financial condition and results of operations.
We are subject to changing law and regulations regarding regulatory matters, corporate governance and public disclosure that have increased both our costs and the risk of
non-compliance.
We are subject to rules and regulations by various governing bodies, including, for example, the SEC, which are charged with the protection of investors and the oversight of companies whose securities are publicly traded, and to new and evolving regulatory measures under applicable law. Our efforts to comply with new and changing laws and regulations have resulted in and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from seeking a business combination target.
Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent changes, we may be subject to penalty and our business may be harmed.
In our Quarterly Report on Form
10-Q
filed May 24, 2021, our Amendment No. 1 to Quarterly Report on Form
10-Q
filed January 13, 2022 and this Annual Report on Form
10-K,
we reached determinations to restate certain previously issued financial statements to correct the accounting treatment for the Company’s securities.
On April 12, 2021, the staff of the SEC (the “SEC Staff”) issued the SEC Statement, wherein the SEC Staff expressed its view that certain terms and conditions common to special purpose acquisition company (“SPAC(s)”) warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to being treated as equity. Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing our warrants. As a result of the SEC Statement, in our Quarterly Report on Form
10-Q
for the quarterly period ended March 31, 2021 filed May 24, 2021,
the company reevaluated the accounting treatment of our warrants, and pursuant to the guidance in ASC 815, Derivatives and Hedging (“ASC 815”), determined the warrants should be classified as derivative liabilities measured at fair value on our balance sheet, with any changes in fair value to be reported each period in earnings on our statement of operations.
On November 9, 2021, the company filed its
Form 10-Q for
the quarterly period ending September 30, 2021 (the “Q3
Form 10-Q”),
which included a section within Note 2, Revision of Previously Reported Financial Statements, that described a revision to the Company’s classification of its Class A common stock subject to redemption issued as part of the units sold in the Company’s initial public offering (“IPO”) on March 22, 2021. As described in Note 2, upon its IPO, the company classified a portion of the Class A common stock as permanent equity to maintain net tangible assets greater than $5,000,000 on the basis that the company will
 
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consummate its initial business combination only if the company has net tangible assets of at least $5,000,001. Previously, the company did not consider redeemable stock classified as temporary equity as part of net tangible assets. The company revised this interpretation to include temporary equity in net tangible assets. As a result, management corrected the error by restating all Class A common stock subject to redemption as temporary equity. This resulted in an adjustment to the initial carrying value of the Class A common stock subject to possible redemption with the offset recorded to
additional paid-in
capital (to the extent available), accumulated deficit and Class A common stock.
In connection with the change in presentation for the Class A common stock subject to possible redemption, the company restated its earnings per share calculation to allocate income and losses shared pro rata between the two classes of shares. This presentation differs from the previously presented method of earnings per share, which was similar to
the two-class
method. The company determined the changes were not qualitatively material to the company’s previously issued financial statements and did not restate its financial statements. Instead, the Company revised its previously financial statements within a section in Note 2 to its Q3
Form 10-Q.
Although the qualitative factors that management assessed tended to support a conclusion that the misstatements were not material, these factors were not strong enough to overcome the significant quantitative errors in the financial statements. The qualitative and quantitative factors supported a conclusion that the misstatements were material on a quantitative basis. Management concluded that the misstatement was such of magnitude that it was probable that the judgment of a reasonable person relying upon the financial statements would have been influenced by the inclusion or correction of the foregoing items. As such, upon further consideration of the change, the company determined the change in classification of the Class A common stock and change to its presentation of earnings per share was material quantitatively and it should restate its previously issued financial statements.
Therefore, on December 23, 2021, the company’s management and the audit committee of the company’s board of directors (the “Audit Committee”) concluded that the company’s previously issued (i) unaudited interim financial statements included in the company’s Quarterly Report on
Form 10-Q
for the quarterly period ended March 31, 2021, filed with the SEC on May 24, 2021 and reported as revised in its Q3 Form
10-Q;
(ii) unaudited interim financial statements included in the company’s Quarterly Report on
Form 10-Q for
the quarterly period ended June 30, 2021, filed with the SEC on August 10, 2021 and reported as revised in its Q3 Form
10-Q;
and (iii) Note 2 of the unaudited interim statements for the quarterly period ended September 30, 2021 and Item 4 included in the Q3
Form 10-Q
(collectively, the “Affected Quarterly Periods”), should be restated to report all Public Shares as temporary equity and calculate earnings per share by allocating income and losses pro rata for each class of common stock and should no longer be relied upon. As such, the company restated its financial statements for the Affected Quarterly Periods in its Amendment No. 1 to Quarterly Report on
Form 10-Q/A
for the quarterly period ended September 30, 2021 filed January 13, 2022.
In preparation of the company’s audited financial statements for the year ended December 31, 2021, the company concluded it should restate its previously issued audited balance sheet as of March 22, 2021, filed with the SEC on a Current Report on Form
8-K
on March 26, 2021 (“Post IPO Balance Sheet”), to classify all Class A common stock subject to possible redemption in temporary equity. In accordance with the SEC and its staff’s guidance on redeemable equity instruments in ASC
480-10-S99,
redemption provisions not solely within the control of the Company, require common stock subject to redemption to be classified outside of permanent equity. The company had previously classified a portion of its Class A common stock in permanent equity. Although the company did not specify a maximum redemption threshold, its charter currently provides that the company will not redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001. Previously, the company did not consider redeemable shares classified as temporary equity as part of net tangible assets. The company revised this interpretation to include temporary equity in net tangible assets.
In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in
 
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Current Year Financial Statements,” the company evaluated the corrections and has determined that the related impact was material to the previously filed
Post-IPO
Balance Sheet. Therefore, the company, in consultation with its Audit Committee, concluded that the
Post-IPO
Balance Sheet should be restated to present all Class A common stock subject to possible redemption as temporary equity and to recognize accretion from the initial book value to redemption value at the time of its Initial Public Offering. As such, the company is reporting this restatement to this period in this annual report.
As a result of these restatements, we have incurred unanticipated costs for accounting and legal fees in connection with or related to the restatement, and may become subject to additional risks and uncertainties related to the restatement, such as a negative impact on investor confidence in the accuracy of our financial disclosures (or in SPACs or former SPAC companies in general), and may raise reputational risks for our business.
We have identified a material weakness in our internal control over financial reporting. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
We have identified a material weakness in our internal control over financial reporting related to the accounting for a significant and unusual transaction related to the warrants we issued in connection with our initial public offering in January 2021. As a result of this material weakness, our management has concluded that our internal control over financial reporting was not effective. This material weakness resulted in a material misstatement of our derivative warrant liabilities, change in fair value of derivative warrant liabilities, Class A common stock subject to possible redemption, accumulated deficit and related financial disclosures for the Affected Periods. For a discussion of management’s consideration of the material weakness identified related to our accounting for a significant and unusual transaction related to the warrants we issued in connection with the January 2021 initial public offering, see “Part II, Item 9A. Controls and Procedures” included in this Annual Report.”
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.
If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
We may face litigation and other risks as a result of the material weakness in our internal control over financial reporting.
As a result of the material weakness, we identified related to the change in accounting for the Public Shares, and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the material weaknesses in our internal control over financial reporting and the preparation of our financial statements. In addition, we have no knowledge of any such litigation or dispute.
 
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However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition or our ability to complete a Business Combination.
 
Item 1B.
Unresolved Staff Comments
None.
 
Item 2.
Properties
We currently maintain our executive offices at 20 University Road, Cambridge, Massachusetts 02138. The cost for our use of this space is included in the $10,000 per month fee we will pay to an affiliate of our sponsor for office space, administrative and support services. We consider our current office space adequate for our current operations.
 
Item 3.
Legal Proceedings
To the knowledge of our management team, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.
 
Item 4.
Mine Safety Disclosures
Not applicable.
 
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PART II
 
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (a) Market Information
Our SAIL
SM
securities each consisting of one share of Class A Common Stock, $0.0001 par value, and
one-fifth
of one redeemable warrant to acquire one share of Class A Common Stock, our Class A common stock and redeemable warrants are traded on the Nasdaq Stock Market LLC under the symbols “REVHU,” “REVH”, and “REVHW,” respectively. Our Class A common stock and warrants began separate trading on May 10, 2021.
(b) Holders
On March 14, 2022, there were 1 holder of record of our units, 1 holder of record of our Class A common stock, 7 holders of our Class B common stock, and 2 holders of record of our warrants.
(c) Dividends
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 our 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 our Initial Business Combination. The payment of any cash dividends subsequent to our Initial Business Combination will be within the discretion of our board of directors at such time. Further, if we incur any indebtedness in connection with a business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith. The Class A shares and the alignment shares will participate ratably in any cash dividend paid.
(d) Securities Authorized for Issuance Under Equity Compensation Plans
None.
(e) Performance Graph
Not applicable.
(f) Recent Sales of Unregistered Securities; Use of Proceeds from Registered Offerings
Sales of Unregistered Securities
Not applicable.
Use of Proceeds
Not applicable.
(g) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
 
Item 6.
Reserved.
Not applicable.
 
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Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
References to the “Company,” “our,” “us” or “we” refer to Revolution Healthcare Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form
10-K
includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form
10-K.
Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.
Overview
We are a blank check company incorporated in Delaware on January 11, 2021, for the purpose of effectuating a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (herein referred to as “Initial Business Combination”). Our initial stockholders are REV Sponsor LLC, a Delaware limited liability company (our “Sponsor”), and Health Assurance Economy Foundation, a charitable foundation (“Foundation”, and together with the Sponsor, collectively, the “Initial Stockholders”), and includes any other holders of Alignment Shares.
The registration statement for our initial public offering was declared effective on March 17, 2021, the “Initial Public Offering”. On March 22, 2021, we consummated the Initial Public Offering of 55,000,000 Stakeholder Aligned Initial Listing securities, or SAIL
SM
 
securities (each, a “SAIL”, and collectively, “SAILs”), including 5,000,000 SAILs as a result of the underwriters’ exercise in part of their over-allotment option. The SAILs were sold at an offering price of $10.00 per SAIL, generating gross proceeds of $550.0 million, and incurring offering costs of approximately $31.0 million, of which approximately $19.3 million was for deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 12,000,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant with our Sponsor, generating gross proceeds of $18.0 million.
Upon the closing of the Initial Public Offering and the Private Placement, $550.0 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement were placed in a trust account (“Trust Account”) located in the United States, with Continental Stock Transfer & Trust Company acting as trustee, and will be invested only in U.S. “government securities,” within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in money market funds meeting the conditions of paragraphs (d)(2), (d)(3) and
 
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(d)(4) of Rule
2a-7
under the Investment Company Act, which invest only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of an Initial Business Combination and (ii) the distribution of the Trust Account as described below.
If we do not complete an Initial Business Combination within this period of time (and stockholders do not approve an amendment to the amended and restated certificate of incorporation to extend this date), it will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a
per-share
price, payable in cash, of $10.00, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii), to our obligations under Delaware law to provide for claims of creditors and in all cases subject to the other requirements of applicable law. The Initial Stockholders, officers and directors entered into a letter agreement with us, pursuant to which they agreed to (i) waive their redemption rights with respect to any Alignment Shares and Public Shares they hold in connection with the completion of the Initial Business Combination, (ii) waive their redemption rights with respect to any Alignment Shares and Public Shares they hold in connection with a stockholder vote to approve an amendment to our amended and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of its Public Shares if we have not consummated an Initial Business Combination within the Business Combination Period (as defined in Note 1) or with respect to any other material provisions relating to stockholders’ rights or
pre-combination
transaction activity and (iii) waive their rights to liquidating distributions from the Trust Account with respect to any Alignment Shares they hold if we fail to complete the an Initial Business Combination within the Business Combination Period (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 an Initial Business Combination within the Business Combination Period).
Results of Operations
Our entire activity from January 11, 2021 (inception) through December 31, 2021, was in preparation for our Initial Public Offering, and since our Initial Public Offering, our activity has been limited to the search for a prospective Initial Business Combination. We will not generate any operating revenues until the closing and completion of our initial Business Combination. We generate
non-operating
income in the form of investment income from our investments held in the Trust Account. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For period from January 11, 2021 (inception) through December 31, 2021, we had net income of approximately $21.4 million, which consisted of $24.9 million for change in fair value of derivative warrant liabilities, approximately $153,000 of income from investments held in Trust Account, offset by approximately $1.4 million of financing costs—derivative warrant liabilities, approximately $2.1 million of general and administrative expenses (including approximately $0.9 million of general and administrative expenses -related party), and approximately $195,000 of franchise tax expense.
Liquidity and Capital Resources
As of December 31, 2021, we had approximately $3.4 million in cash and working capital of approximately $3.9 million.
Our liquidity needs to date have been satisfied through a cash contribution of $25,000 from our Sponsor to purchase Alignment Shares, a loan of approximately $277,000 from our Sponsor pursuant to the Note (as defined in Note 4), and the proceeds from the consummation of the Private Placement not held in the Trust Account. The we repaid the Note in full on March 24, 2021. In addition, in order to finance transaction costs in connection with an Initial Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, but are not obligated to, provide us Working Capital Loans. As of December 31, 2021, there were no amounts outstanding under any Working Capital Loan (as defined in Note 4).
 
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Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of an Initial Business Combination or one year from this filing. Over this time period, we will be using these funds held outside of the Trust Account for paying existing accounts payable, identifying and evaluating prospective Initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Initial Business Combination.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities, other than for an agreement to pay our Sponsor $10,000 per month for office space, secretarial and administrative support provided to members of our management team. In addition, each independent director will receive quarterly cash compensation of $50,000 and $75,000 (or between $200,000 and $300,000 in the aggregate per year).
Registration Rights
The holders of the Alignment Shares, Private Placement Warrants, and Private Placement Warrants that may be issued upon conversion of Working Capital Loans (and any shares of Class A common stock into which such securities may convert and that may be issued upon conversion of Working Capital Loans and upon conversion of the Alignment Shares) were entitled to registration rights pursuant to a registration rights agreement signed upon the effective date of the Initial Public Offering, requiring us to register such securities for resale. The holders of these securities were entitled to make up to three demands, excluding short form demands, that we registered such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the Initial Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriter a
45-day
option to purchase up to 7,500,000 additional SAILs, to cover any over-allotment, at the initial public offering price less the underwriting discounts and commissions. On March 22, 2021, the underwriters partially exercised the over-allotment option to purchase an additional 5,000,000 SAILs.
The underwriter was entitled to an underwriting discount of $0.20 per SAIL, or $11.0 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per SAIL, or approximately $19.3 million in the aggregate will be payable to the underwriter for deferred underwriting commissions. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that the Company completes an Initial Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
 
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Investments Held in the Trust Account
Our portfolio of investments is comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When our investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When our investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in income from investments held in the Trust Account in the accompanying statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to Accounting Standards Codification (“ASC”), Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”). and Financial Accounting Standards Board (“FASB”) ASC Topic 815
, Derivatives and Hedging
(“ASC 815”)
, paragraph 15 Embedded Derivatives
(“ASC
815-15”).
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is
re-assessed
at the end of each reporting period.
The warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815, paragraph 40,
Contracts in Entity’s Own Equity
(“ASC
815-40”).
Accordingly, we recognize the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to
re-measurement
at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The fair value of the Public Warrants issued in connection with the Public Offering and Private Placement Warrants were initially measured at fair value utilizing modified Black-Scholes Model. The fair value of Public Warrants issued in connection with the Initial Public Offering have subsequently been measured based on the listed market price of such warrants at December 31, 2021. The fair value of the Private Placement Warrants continues to be measured utilizing a modified Black-Scholes Model.
Class A Common Stock Subject to Possible Redemption
We account for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) is classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity. Our Class A common stock feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of December 31, 2021, 55,000,000 shares of Class A common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’ equity section of our balance sheets.
Under ASC
480-10-S99,
we have elected to recognize changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal the redemption value at the end of the reporting period. This method would view the end of the reporting period as if it were also the redemption date of the security. Effective with the closing of the Initial Public Offering, we recognized the accretion from initial book value to redemption amount, which resulted in charges against additional
paid-in
capital (to the extent available) and accumulated deficit.
 
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Net Income Per Share of Common Stock
We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income per common stock is calculated by dividing the net income by the weighted average shares of common stock outstanding for the respective period.
The calculation of diluted net income per common stock does not consider the effect of the warrants issued in connection with the Initial Public Offering and the Private Placement to purchase an aggregate of 23,000,000 shares of common stock in the calculation of diluted income per share, because their exercise is contingent upon future events. The Company has considered the effect of shares of Class B common stock that were excluded from the weighted average number of basic shares outstanding as they were contingent on the exercise of over-allotment option by the underwriters. Since the contingency was satisfied, the Company has included these shares in the weighted average number as of the beginning of the period to determine the dilutive impact of these shares. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
Excess Change in Fair Value of Private Placement Warrants
We record
non-cash
compensation recognized as a result of the fair value of the Private Placement Warrants being in excess of the amount paid by the Sponsor, pursuant to ASC 718, “Share-based Compensation”. For the period from January 11, 2021 (inception) through December 31, 2021, we recorded $13.9 million. This amount is included in the change in fair value of derivative warrant liabilities on the statement of operations.
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update (“ASU”)
No. 2020-06,
Debt-Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic
815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity
(“ASU
2020-06”),
which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. We adopted ASU
2020-06
on January 11, 2021. Adoption of the ASU did not impact our financial position, results of operations or cash flows.
We do not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on our financial statements.
Off-Balance
Sheet Arrangements
As of December 31, 2021, we did not have any
off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation
S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for
non-emerging
growth companies. As a result, the financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
 
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Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of
non-emerging
growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
 
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by
Rule 12b-2
of the Exchange Act and are not required to provide the information otherwise required under this item.
 
Item 8.
Financial Statements and Supplementary Data.
The financial statements required by this Item 8 are included in Item 15 of this Annual Report.
 
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
 
Item 9A.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal year ended December 31, 2021, as such term is defined in Rules
13a-15(e)
and
15d-15(e)
under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer has concluded that during the period covered by this report, our disclosure controls and procedures were not effective as of December 31, 2021, because of a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, the Company’s management has concluded that our control around the interpretation and accounting for certain complex financial instruments was not effectively designed or maintained. This material weakness resulted in the restatement of the Company’s interim financial statements for the quarters ended March 31, 2021, June 30, 2021, and September 30, 2021.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
 
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Management’s Report on Internal Controls Over Financial Reporting
This Annual Report on Form
10-K
does not include an attestation report of internal controls from our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2021, covered by this Annual Report on Form
10-K
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting as the circumstances that led to the restatement of our financial statements described in Annual Report on Form
10-K
had not yet been identified.
Our principal executive officer and principal financial officer performed additional accounting and financial analyses and other post-closing procedures including consulting with subject matter experts related to the accounting for certain complex financial instruments. The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.
 
Item 9B.
Other Information
None.
 
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
 
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Part III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
As of the date of this Annual Report on Form
10-K,
our officers and directors are as follows:
 
Name
  
Age
    
Position
Jay Markowitz, M.D.
     59      Chief Executive Officer and Director
Mark McDonnell
     53      Chief Financial Officer
Jason Doren
     52      Chief Administrative Officer
Paul Fielding
     35      Chief Operating Officer
Jeff Leiden, M.D., Ph.D.
     66      Chairman
Kris Engskov
     50      Director
Catherine Friedman
     61      Director
Robert Nelsen
     58      Director
Jennifer Schneider, M.D.
     46      Director
Hemant Taneja
     46      Director
Jay Markowitz, M.D.
Jay Markowitz, M.D., our Chief Executive Officer and a Director, is currently a Senior Partner at ARCH, having joined the firm in 2021. He previously served as Senior Vice President, Portfolio Management, of Regeneron Pharmaceuticals, Inc. (Nasdaq: REGN) from 2017 to 2020. Dr. Markowitz has 16 years of experience as a leading institutional investor and analyst in the biopharmaceutical sector. He was previously at Capital World Investors, where he was a U.S. pharmaceutical and biotechnology analyst and portfolio manager. Prior to Capital World Investors, Dr. Markowitz was a biotechnology analyst and portfolio manager at T. Rowe Price. Before transitioning to an investment career, he was an assistant professor and transplant surgeon at the Johns Hopkins University School of Medicine. Dr. Markowitz earned his M.D. from Duke University and holds a B.A. in Chemistry, summa cum laude, from Columbia University. He completed a fellowship in transplant surgery at the UCLA Medical Center, a surgical residency at Massachusetts General Hospital, and a Research Fellowship in Cellular and Molecular Immunology at the Harvard School of Public Health.
Mark McDonnell
Mark McDonnell, our Chief Financial Officer, joined ARCH in 1999, where he currently serves as a Managing Director, Chief Financial and Chief Administrative Officer. Previously, Mr. McDonnell held the position of Chief Financial Officer at Marquette Venture Partners. He has also held roles in financial management with Enterprise Systems, a health care software developer acquired by HBO & Co., and with KPMG, LLP, serving clients primarily in the information and communication industries. Mr. McDonnell holds a B.S. in Accounting from Marquette University and is a certified public accountant.
Jason Doren
Jason Doren, our Chief Administrative Officer, has served as General Counsel for ARCH since 2019. Prior to that, Mr. Doren was Chief Administrative Officer and General Counsel of Kleiner Perkins (KP). Prior to KP, Mr. Doren was General Counsel of SVB Capital, the venture capital investing division of SVB Financial Group (SVB), and served as Assistant General Counsel of SVB, where he was responsible for a variety of matters including strategic investments, international expansion, M&A and SVB’s government affairs efforts. Earlier in his career, Mr. Doren was an attorney at Cooley LLP, where he represented venture capital funds and venture capital-backed companies, and prior to Cooley he was a trial attorney with Bronson, Bronson & McKinnon LLP in San Francisco. Mr. Doren has over 25 years of legal and venture capital industry experience. He is a founding
 
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member of the NVCA General Counsel Advisory Board,
co-chaired
the Advanced Venture Capital seminar for the Practicing Law Institute, a non-profit committed to continuing legal education, and served on the Advisory Board for the Stanford University Venture Capital Directors’ College. Mr. Doren earned his J.D. from the UCLA School of Law and holds a B.S. in Finance, summa cum laude, from the University of Illinois.
Paul Fielding
Paul Fielding, our Chief Operating Officer, joined Revolution Healthcare Acquisition Corp. effective August 19, 2021. He is also part of General Catalyst Partners, LLC (“General Catalyst”), since March 2021. Prior to joining General Catalyst in March 2021, Mr. Fielding served as Managing Partner at Grenet Partners from June 2019 until December 2020. Before Joining Grenet Partners, Mr. Fielding served as a Principal at General Catalyst from June 2018 until June 2019. Mr. Fielding served as Vice President of Products, Pricing, and Risk at SoFi from May 2013 until March 2018. Mr. Fielding was responsible for financial product design, loan features, and daily pricing for SoFi’s lending businesses. Mr. Fielding also led Capital Markets for SoFi, launching its financing platform where he and his team raised over $12B through securitizations, loan sales, and other private transactions and oversaw $3B+ in borrowings. Prior to joining SoFi, Mr. Fielding was a principal and
co-founder
at MeasureOne, a student lending focused data and analytics firm offering portfolio management, servicing oversight, and analytics services. Paul holds a B.A., magna cum laude, in Economics and Accounting from UCLA.
Jeff Leiden, M.D., Ph.D.
Dr. Jeff Leiden serves as the Chairman of our board of directors. Dr. Leiden has served as Executive Chairman of Vertex Pharmaceuticals (Nasdaq: VRTX) since April 2020. He previously served as Vertex’s Chief Executive Officer and President from 2012 through March 2020. He has been a member of Vertex’s board of directors since July 2009, and has served as its Chairman since May 2012, and its lead independent director from October 2010 through December 2011. Prior to that, Dr. Leiden was a Managing Director at Clarus Ventures, a life sciences venture capital firm, from 2006 through January 2012. Dr. Leiden was President and Chief Operating Officer of Abbott Laboratories (NYSE: ABT), Pharmaceuticals Products Group, and a member of the Board of Directors of Abbott Laboratories from 2001 to 2006. From 1987 to 2000, Dr. Leiden held several academic appointments, including the Rawson Professor of Medicine and Pathology and Chief of Cardiology and Director of the Cardiovascular Research Institute at the University of Chicago, the Elkan R. Blout Professor of Biological Sciences at the Harvard School of Public Health, and Professor of Medicine at Harvard Medical School. He is an elected member of both the American Academy of Arts and Sciences and the Institute of Medicine of the National Academy of Sciences. Dr. Leiden serves as a director of Massachusetts Mutual Life Insurance Company, an insurance company. Dr. Leiden was a director and the
non-executive
Vice Chairman of the board of Shire plc, a specialty biopharmaceutical company, from 2006 to January 2012, and a director of Quest Diagnostics, a medical diagnostics company, from December 2014 to May 2019. Dr. Leiden received his M.D., Ph.D. and B.A. degrees from the University of Chicago.
Kris Engskov
Kris Engskov is a member of our board of directors. Mr. Engskov is Chief Executive Officer of FHCC, Inc, a provider of senior-focused mental and behavioral care services, a role he has served in since founding the company in October of 2021. Just prior, Mr. Engskov served as the President of Aegis Living since 2019, where he is a member of the Leadership Steering Committee responsible for setting company growth strategy, program development, and new market site selection. Mr. Engskov previously spent 16 years at Starbucks Corporation, where he led and gained experiences in all parts of the organization-from brand strategy and marketing, to real estate development, to technology implementation, to customer experiences and operational excellence. His roles included president of Starbucks’ flagship U.S. retail business, leading 170,000 employees across 8,300 stores, and president of the Europe, Middle East, and Africa (EMEA) division, where he built the Starbucks brand across more than 30 countries. Prior to Starbucks, Mr. Engskov worked for Madrona Venture Group, LLC, a Seattle-based venture capital fund. Mr. Engskov holds a B.A. in Public Administration from the University of Arkansas at Fayetteville.
 
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Catherine Friedman
Catherine Friedman is a member of our board of directors. Ms. Friedman is a business executive with nearly 40 years of experience across finance, technology, and healthcare. She is an Executive Venture partner at GV , where she is a senior member of the investing team and advises the life sciences portfolio.
Ms. Friedman has spent 15 years on the boards of leading public and private life sciences and technology companies. She previously served as the chair of the board of directors of GRAIL, Inc.(acquired by Illumnia), and as an independent director at Vividion Therapeutics (acquired by Bayer). She is currently a member of the board of directors of Altaba Inc. (formerly Yahoo!), Radius Health, Inc., Seer, Inc., and Lyell Immunopharma Inc.
Earlier in her career, Ms. Friedman spent nearly
24-years
in an investment banking career with Morgan Stanley, including Managing Director, Head of West Coast Healthcare, and
Co-Head
of Morgan Stanley’s Biotechnology Practice. Additionally, Ms. Friedman serves as a foundation trustee for the University of California San Francisco and the Darden School Foundation at the University of Virginia. She holds a B.A. in Economics from Harvard University and an M.B.A. from The University of Virginia’s Darden School of Business.
Robert Nelsen
Robert Nelsen is a member of our board of directors. Mr. Nelsen is a
co-founder
and a Managing Director of ARCH. He joined ARCH at its founding and played a significant role in the creation, early sourcing, financing and development of more than 100 companies, including over thirty which have reached valuations exceeding $1 billion.
Mr. Nelsen is focused on generating new ideas for disruptive technologies or business models and partnering with founding management teams and entrepreneurs to execute on these visions by advancing novel platform technologies with the overarching goal of improving care and outcomes. Some of his notable early-stage investments include Illumina, Inc., Alnylam Pharmaceuticals, Juno Therapeutics (sold to Celgene Corporation for $11.9 billion in 2018) and GRAIL (announced a sale to Illumina for $8 billion in 2020 plus a future revenue share). Other investments over the years have included prominent biotechnology and life sciences companies, such as Array BioPharma (sold to Pfizer for $11.4 billion), Receptos, Inc. (sold to Celgene for $7.2 billion), Sage Therapeutics, Beam Therapeutics, Denali Therapeutics, Karuna Therapeutics, Lyell Immunopharma, Vir Biotechnology, Fate Therapeutics, Editas Medicine, Sana Biotechnology, deCODE Genetics, 10x Genomics and Semma Therapeutics (sold to Vertex Pharmaceuticals for $1 billion).
Mr. Nelsen is a director of Vir Bio, Sana Biotechnology, Lyell Immunopharma, Denali Therapeutics, and serves as Chairman of Hua Medicine, among others. He previously served as a Trustee of the Fred Hutchinson Cancer Research Institute, the Institute for Systems Biology, and was a director of the National Venture Capital Association. Mr. Nelsen holds an M.B.A. from the University of Chicago and a B.S. in Economics and Biology from the University of Puget Sound.
Jennifer Schneider, M.D.
Dr. Jennifer Schneider is a member of our board of directors. Dr. Schneider was the President of Livongo Health from December 2018 until October 2020, where she was responsible for product, data science, engineering, marketing, clinical operations, and growth strategy. Dr. Schneider previously served as the company’s Chief Medical Officer from 2015 to 2018, where she led the company’s strategic clinical product vision, data science, clinical trials, and the organization’s certified diabetes educators and coaches. Dr. Schneider also serves as a director of HAAC, a special purpose acquisition company sponsored by an affiliate of General Catalyst. Dr. Schneider is the author of
 Decoding Health Signals: Silicon Valley’s Consumer-First Approach to a
 
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New Era of Health
, which offers a guide to the depth of the chronic conditions problem facing the industry today and explores how companies are using big data analytics and artificial intelligence to reinvent care delivery for people with chronic conditions. Dr. Schneider was recently named to Modern Healthcare’s List of Top Clinical Executives.
Prior to Livongo, Dr. Schneider held several key leadership roles at Castlight Health from 2010 to 2015, most recently as Chief Medical Officer. Dr. Schneider also has held leadership roles as a health outcomes researcher and Chief Resident at Stanford University from 2005 to 2006, and she has practiced medicine as an attending physician at Stanford University, the VA Palo Alto Health Care System, and Kaiser Permanente. Dr. Schneider holds a B.S. in Biology from the College of the Holy Cross, an M.D. from Johns Hopkins School of Medicine, and an M.S. in Health Services Research from Stanford University. Dr. Schneider completed her internal medicine residency at Stanford University Hospital.
Hemant Taneja
Hemant Taneja, is a member of our board of directors. Mr. Taneja has been a managing director at General Catalyst since 2007 and the founder of the firm’s Silicon Valley operations. Mr. Taneja partners with mission-driven founders building platform companies that are fundamentally aligned with the long-term interests of society. Mr. Taneja is an early investor in market-leading companies across many sectors of the economy like Anduril, Canva, Color, Gitlab, Grammarly, Gusto, Livongo, Ro, Samsara, Snap, and Stripe. Mr. Taneja also serves as chairman and chief executive officer of HAAC, a special purpose acquisition company sponsored by an affiliate of General Catalyst.
Mr. Taneja is also the founder and Executive Chairman of Commure, a company that has partnered with major health systems to modernize the software infrastructure for the healthcare space since its inception in 2017. Mr. Taneja’s recently published book UnHealthcare,
co-authored
with Dr. Stephen K. Klasko, lays out their thesis for how the healthcare system needs to transform into a health assurance system to bring consumerism, affordability, and rational economic behavior to this important sector.
In addition to his investment work, Mr. Taneja is the
Co-Founder
of Advanced Energy Economy, an organization focused on transforming energy policy in America since 2011; and is a Founding Board Member of the Khan Lab School, a nonprofit
K-12
school dedicated to classroom innovation since 2014. Mr. Taneja sits on the Board of Fellows for the Stanford School of Medicine and teaches a course at the college on A.I., Entrepreneurship, and Society. More recently, Mr. Taneja was featured in Business insider’s “100 People Transforming Business” list. Mr. Taneja graduated from Massachusetts Institute of Technology (MIT) with a B.S. in each of Electrical Engineering & Computer Science, Mathematics and Biology & Biomedical Engineering, an M. Eng. in Electrical Engineering & Computer Science, and an M.S. in Operations Research.
Number and Terms of Office of Officers and Directors
Our board of directors is divided into three classes, with only one class of directors being elected in each year, and with each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term. In accordance with the Nasdaq corporate governance requirements, we are not required to hold an annual meeting until one year after our first fiscal year end following our listing on Nasdaq. The term of office of the first class of directors, consisting of Kris Engskov and Catherine Friedman, will expire at our first annual meeting of stockholders. The term of office of the second class of directors, consisting of Jeff Leiden and Jennifer Schneider, will expire at our second annual meeting of stockholders. The term of office of the third class of directors, consisting of Jay Markowitz, Robert Nelsen, Hemant Taneja, will expire at our third annual meeting of stockholders.
Prior to the completion of an Initial Business Combination n, any vacancy on the board of directors may be filled by a nominee chosen by holders of a majority of our alignment shares. In addition, prior to the completion
 
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of an Initial Business Combination, holders of a majority of our alignment shares may remove a member of the board of directors for any reason.
Pursuant to an agreement to be entered into on or prior to the closing of our Initial Public Offering, our sponsor, upon and following consummation of an Initial Business Combination, will be entitled to nominate three individuals for election to our board of directors, as long as the sponsor holds any securities covered by the registration and stockholder rights agreement.
Our officers are appointed 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 certificate of incorporation as it deems appropriate. Our amended and restated certificate of incorporation provides that our officers may consist of one or more chairman of the board, chief executive officer, president, chief financial officer, vice presidents, secretary, treasurer and such other offices as may be determined by the board of directors.
Director Independence
Nasdaq listing standards require that a majority of our board of directors be independent within one year of our Initial Public Offering. Our board of directors has determined that Kris Engskov, Catherine Friedman and Jeff Leiden are “independent directors” as defined in the Nasdaq listing standards. We intend to appoint additional independent directors within one year following our Initial Public Offering pursuant to the Nasdaq
phase-in
provisions for Initial Public Offerings to the extent that we have not consummated an Initial Business Combination by then. Our independent directors will have regularly scheduled meetings at which only independent directors are present.
Committees of the Board of Directors
Our board of directors will have three standing committees: an audit committee, a nominating committee and a compensation committee. Subject to
phase-in
provisions and a limited exception, the rules of Nasdaq and Rule
10A-3
of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors. Subject to
phase-in
provisions and a limited exception, the rules of Nasdaq require that the compensation committee and the nominating committee of a listed company be comprised solely of independent directors.
Audit Committee
We established an audit committee of the board of directors. Kris Engskov, Catherine Friedman and Jeff Leiden are members of our audit committee. Our board of directors has determined that each of Kris Engskov, Catherine Friedman and Jeff Leiden are independent under the Nasdaq listing standards and applicable SEC rules. Catherine Friedman serves as chairman of the audit committee. Each member of the audit committee is financially literate and our board of directors has determined that qualifies as an “audit committee financial expert” as defined in applicable SEC rules.
The audit committee is responsible for:
 
   
meeting with our independent registered public accounting firm regarding, among other issues, audits, and adequacy of our accounting and control systems;
 
   
monitoring the independence of the independent registered public accounting firm;
 
   
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;
 
   
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 registered public accounting firm, including the fees and terms of the services to be performed;
 
   
appointing or replacing the independent registered public accounting firm;
 
   
determining the compensation and oversight of the work of the independent registered public accounting firm (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;
 
   
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;
 
   
monitoring compliance on a quarterly basis with the terms of our Initial Public Offering and, if any noncompliance is identified, immediately taking all action necessary to rectify such noncompliance or otherwise causing compliance with the terms of our Initial Public Offering; and
 
   
reviewing and approving all payments made to our existing stockholders, executive officers or directors and their respective affiliates. Any payments made to members of our audit committee will be reviewed and approved by our board of directors, with the interested director or directors abstaining from such review and approval.
Nominating Committee
We established a nominating committee of our board of directors. The members of our nominating committee are Kris Engskov, Catherine Friedman and Jeff Leiden. Kris Engskov serves as chairman of the nominating committee. Under the Nasdaq listing standards, we are required to have a nominating committee composed entirely of independent directors. Our board of directors has determined that each of Kris Engskov, Catherine Friedman and Jeff Leiden are independent.
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 will be specified in a charter to be adopted by us, generally will provide that persons to be nominated:
 
   
should have demonstrated notable or significant achievements in business, education or public service;
 
   
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
 
   
should have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of the stockholders.
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.
 
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Compensation Committee
We established a compensation committee of our board of directors. The members of our compensation committee are Kris Engskov, Catherine Friedman and Jeff Leiden. Jeff Leiden serves as chairman of the compensation committee.
Under the Nasdaq listing standards, we are required to have a compensation committee composed entirely of independent directors. Our board of directors has determined that each of Kris Engskov, Catherine Friedman and Jeff Leiden are independent. We will adopt a compensation committee charter, which will detail the principal functions of the compensation committee, including:
 
   
reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;
 
   
reviewing and approving the compensation of all of our other Section 16 executive officers;
 
   
reviewing our executive compensation policies and plans;
 
   
implementing and administering our incentive compensation equity-based remuneration plans;
 
   
assisting management in complying with our proxy statement and annual report disclosure requirements;
 
   
approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees;
 
   
producing a report on executive compensation to be included in our annual proxy statement; and
 
   
reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.
The charter will also provide that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
Compensation Committee Interlocks and Insider Participation
None of our executive officers currently serve, and in the past year has not served, as a member of the compensation committee of any entity that has one or more executive officers serving on our board of directors.
Code of Ethics
We adopted a Code of Ethics applicable to our directors, officers and employees. A copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form
8-K.