Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this
Quarterly Report on Form 10-Q (the "Report") including, without limitation,
statements under this "Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations" regarding our financial position, business
strategy and the plans and objectives of management for future operations, are
forward- looking statements. When used in this Report, words such as
"anticipate," "believe," "estimate," "expect," "intend" and similar expressions,
as they relate to us or our management, identify forward-looking statements.
Such forward-looking statements are based on the beliefs of our management, as
well as assumptions made by, and information currently available to, the our
management. Actual results could differ materially from those contemplated by
the forward-looking statements as a result of certain factors detailed in our
filings with the Securities and Exchange Commission (the "SEC"). All subsequent
written or oral forward-looking statements attributable to us or persons acting
on our behalf are qualified in their entirety by this paragraph.
Overview
We were formed on September 23, 2020 for the purpose of entering into a merger,
share exchange, asset acquisition, stock purchase, recapitalization,
reorganization or other similar business combination with one or more target
businesses. Our efforts to identify a prospective target business are not
limited to a particular industry or geographic region although we currently are
focusing on target businesses in the nexus of media, entertainment and
technology. We are intending to utilize cash derived from the proceeds of our
initial public offering, our securities, debt or a combination of cash,
securities and debt, in effecting a business combination. The issuance of
additional shares of common stock or preferred stock:
? may significantly reduce the equity interest of our stockholders, which
dilution would increase if the anti-dilution provisions in our Class B common
stock resulted in the issuance of our Class A common stock on a greater than
one-to-one basis upon conversion of our Class B common stock;
? may subordinate the rights of holders of shares of Class A common stock if we
issue shares of preferred stock with rights senior to those afforded to our
shares of Class A common stock;
? will likely cause a change in control if a substantial number of our shares of
Class A common stock are issued, which may affect, among other things, our
ability to use our net operating loss carry forwards, if any, and most likely
will also result in the resignation or removal of our present officers and
directors; and
? may adversely affect prevailing market prices for our securities.
Similarly, if we issue debt securities, it could result in:
? default and foreclosure on our assets if our operating revenues after a
business combination are insufficient to pay our debt obligations:
? acceleration of our obligations to repay the indebtedness even if we have made
all principal and interest payments when due if the debt security contains
covenants that required the maintenance of certain financial ratios or
reserves and we breach any such covenant without a waiver or renegotiation of
that covenant;
? our immediate payment of all principal and accrued interest, if any, if the
debt security is payable on demand; and
? our inability to obtain additional financing, if necessary, if the debt
security contains covenants restricting our ability to obtain additional
financing while such security is outstanding.
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On February 11, 2021, we consummated our initial public offering of 15,000,000
units. Each unit consists of one share of common stock of the Company, par value
$0.0001 per share ("Common Stock"), and one-half of one redeemable warrant of
the Company, with each warrant entitling the holder thereof to purchase one
share of Common Stock for $11.50 per whole share. The units were sold at a price
of $10.00 per unit, generating gross proceeds to the Company of $150,000,000.
On February 11, 2021, simultaneously with the consummation of our initial public
offering, we completed the private sale of an aggregate of 4,450,000 warrants to
our sponsor at a purchase price of $1.00 per private placement warrant,
generating gross proceeds of $4,450,000.
On February 22, 2021, the underwriters exercised the over-allotment option in
full to purchase 2,250,000 units. On February 22, 2021, simultaneously with the
closing of the underwriters' full exercise of the over-allotment option, we
completed the private sale of an aggregate of 200,000 private placement warrants
to our sponsor, at a purchase price of $1.00 per private placement warrant,
generating gross proceeds of $200,000.
Following the closing of our initial public offering on February 11, 2021 and
the underwriters' full exercise of over-allotment option on February 22, 2021,
$172,500,000 from the net proceeds of the sale of the units in our initial
public offering, the exercise of the over-allotment option and the sale of the
private placement warrants was placed in a Trust Account established for the
benefit of our public stockholders (the "Trust Account") and maintained by
Continental, as trustee.
On October 27, 2022, the Company held a special meeting in lieu of the 2022
annual meeting of stockholders (the "Meeting"), at which the Company's
stockholders approved the Extension Amendment (as defined below). At the
Meeting, Stockholders holding 16,441,812 shares of common stock exercised their
right to redeem such shares for a pro rata portion of the funds in the Company's
Trust Account. As a result, $165,347,999 (approximately $10.05 per share) was
removed from the Trust Account to pay such holders.
As of a result of the approval of the Extension Amendment, the Sponsor has
agreed to contribute to the Company a loan (the "Charter Extension Loan") of
$50,000 per month, for each calendar month (commencing on November 8, 2022 and
on the 8th day of each subsequent month) until the Extended Date (as defined
below) (each, an "Extension Period"), or portion thereof, that is needed to
complete an initial Business Combination, for up to an aggregate of $300,000.
Each Charter Extension Loan will be deposited in the Trust Account within five
(5) business days from the beginning of such calendar month (or portion
thereof).
On October 27, 2022, the Company filed an amendment to the Company's Amended and
Restated Certificate of Incorporation with the Secretary of State of the State
of Delaware (the "Extension Amendment"). The Extension Amendment extends the
date by which the Company must consummate its initial business combination to
May 8, 2023, or such earlier date as determined by our board of directors (the
"Extended Date") (the "Extended Combination Period")
If we are unable to complete our initial business combination by May 8, 2023, we
will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter,
redeem 100% of the outstanding public shares, at a per-share price, payable in
cash, equal to the aggregate amount then on deposit in the Trust Account,
including any interest not previously released to us but net of franchise and
income taxes payable, divided by the number of then outstanding public shares,
which redemption will completely extinguish public stockholders' rights as
stockholders (including the right to receive further liquidation distributions,
if any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our remaining stockholders
and our board of directors, dissolve and liquidate, subject (in the case of (ii)
and (iii) above) to its obligations under Delaware law to provide for claims of
creditors and the requirements of other applicable law. There will be no
redemption rights or liquidating distributions with respect to our warrants,
which will expire worthless if we fail to complete our initial business
combination by November 11, 2022 and, in such event, such amounts will be
included with the funds held in the Trust Account that will be available to fund
the redemption of the public shares. In the event of such distribution, it is
possible that the per share value of the assets remaining available for
distribution will be less than $10.00.
Our amended and restated certificate of incorporation provides that we will have
only until May 8, 2023 to complete an initial business combination. If we have
not completed an initial business combination by such date, we will (i) cease
all operations except for the purpose of winding up, (ii) as promptly as
reasonably possible but not more than ten business days thereafter, redeem 100%
of the outstanding public shares, at a per-share price, payable in cash, equal
to the aggregate amount then on deposit in the Trust Account, including any
interest not previously released to us but net of taxes payable, divided by the
number of then outstanding public shares, which redemption will completely
extinguish public stockholders' rights as stockholders (including the right to
receive further liquidation distributions, if any), subject to applicable law,
and (iii) as promptly as reasonably possible following such redemption, subject
to the approval of our remaining stockholders and our board of directors,
dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our
obligations under Delaware law to provide for claims of creditors and the
requirements of other applicable law.
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Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has
concluded that while it is reasonably possible that the virus could have a
negative effect on the Company's financial position, results of its operations,
cash flows and/or search for a target company, the specific impact is not
readily determinable as of the date of the condensed financial statements. The
condensed financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
On February 24, 2022, Russian forces launched significant military action
against Ukraine, and sustained conflict and disruption in the region is
possible. The impact to Ukraine as well as actions taken by other countries,
including new and stricter sanctions imposed by Canada, the United Kingdom, the
European Union, the United States, and other countries and companies and
organizations against officials, individuals, regions, and industries in Russia
and Ukraine, and actions taken by Russia in response to such sanctions, and each
country's potential response to such sanctions, tensions, and military actions
could have a material adverse effect on the Company's ability to complete the
Business Combination. Any such material adverse effect from the conflict and
enhanced sanctions activity may include reduced trading and business activity
levels, disruption of financial markets, increased costs, disruption of
services, inability to complete financial or banking transactions, and inability
to service existing or new customers in the region. Prolonged unrest, military
activities, or broad-based sanctions, should they be implemented, could have a
material adverse effect on the Company's ability to complete the Business
Combination.
On August 16, 2022, the Inflation Reduction Act of 2022 (the "IR Act") was
signed into federal law. The IR Act provides for, among other things, a new U.S.
federal 1% excise tax on certain repurchases of stock by publicly traded U.S.
domestic corporations and certain U.S. domestic subsidiaries of publicly traded
foreign corporations occurring on or after January 1, 2023. The excise tax is
imposed on the repurchasing corporation itself, not its shareholders from which
shares are repurchased. The amount of the excise tax is generally 1% of the fair
market value of the shares repurchased at the time of the repurchase. However,
for purposes of calculating the excise tax, repurchasing corporations are
permitted to net the fair market value of certain new stock issuances against
the fair market value of stock repurchases during the same taxable year. In
addition, certain exceptions apply to the excise tax. The U.S. Department of the
Treasury (the "Treasury") has been given authority to provide regulations and
other guidance to carry out and prevent the abuse or avoidance of the excise
tax.
Any redemption or other repurchase that occurs after December 31, 2022, in
connection with a Business Combination, extension vote or otherwise, may be
subject to the excise tax. Whether and to what extent the Company would be
subject to the excise tax in connection with a Business Combination, extension
vote or otherwise would depend on a number of factors, including (i) the fair
market value of the redemptions and repurchases in connection with the Business
Combination, extension or otherwise, (ii) the structure of a Business
Combination, (iii) the nature and amount of any "PIPE" or other equity issuances
in connection with a Business Combination (or otherwise issued not in connection
with a Business Combination but issued within the same taxable year of a
Business Combination) and (iv) the content of regulations and other guidance
from the Treasury. In addition, because the excise tax would be payable by the
Company and not by the redeeming holder, the mechanics of any required payment
of the excise tax have not been determined. The foregoing could cause a
reduction in the cash available on hand to complete a Business Combination and
in the Company's ability to complete a Business Combination.
Results of Operations
As of September 30, 2022, we have not commenced any operations. All activity for
the period from September 23, 2020 (inception) through September 30, 2022
relates to our formation, initial public offering and search for a target
company. We will not generate any operating revenues until after the completion
of our initial business combination, at the earliest. We will generate
non-operating income in the form of interest and dividend income from the
proceeds derived from the initial public offering and placed in the Trust
Account.
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For the three months ended September 30, 2022, we had a net loss of $144,983
which was comprised of unrealized loss on change in fair value of convertible
promissory notes of $51, operating costs of $860,670, and income tax provision
of $127,817, less interest and dividend income of $758,630 from money market
funds held in our Trust Account and unrealized gain on change in fair value of
warrants of $84,925.
For the nine months ended September 30, 2022, we had a net income of $355,058
which was comprised of interest and dividend income of $946,819 from money
market funds held in our Trust Account, unrealized gain on change in fair value
of warrants of $1,865,902, unrealized gain on change in fair value of
convertible promissory notes of $12,123, less operating costs of $2,341,969 and
income tax provision of $127,817.
For the three months ended September 30, 2021, we had a net income of $475,754
which was comprised of operating costs of $270,269, interest income of $3,545
from marketable securities held in our Trust Account, and unrealized gain on
change in fair value of warrants of $742,478.
For the nine months ended September 30, 2021, we had a net income of $1,076,838
which was comprised of operating costs of $665,729, interest income of $7,995
from marketable securities held in our Trust Account, unrealized gain on change
in fair value of warrants of $3,052,923, and other expense relating to fair
value exceeding amount paid for warrants of $1,318,351.
Going Concern and Liquidity
As of September 30, 2022, we had $21,078 in our operating bank account and
working capital deficit of $22,399 (less tax payable).
Prior to the completion of the Initial Public Offering, our liquidity needs had
been satisfied through a payment from the Sponsor of $25,000 for the Founder
Shares to cover certain offering costs and the loan under an unsecured
promissory note from the Sponsor of $141,700. We fully paid the note to the
Sponsor on February 12, 2021. Subsequent to the consummation of the Initial
Public Offering and Private Placement, our liquidity needs have been satisfied
through the proceeds from the consummation of the Private Placement not held in
the Trust Account.
In addition, in order to finance transaction costs in connection with a Business
Combination, our Sponsor, officers, directors and their affiliates may, but are
not obligated to, provide us Working Capital Loans, as defined below. To date,
there were no amounts outstanding under any Working Capital Loans.
On April 26, 2022, we issued one promissory note in the principal amount of up
to $195,000 to the Sponsor. The note bears no interest and is due and payable
upon the earlier to occur of (i) the date on which we consummate the initial
Business Combination and (ii) the date that the winding up is effective. At the
Sponsor's option, at any time prior to payment in full of the principal balance
of the promissory note, the Sponsor may elect to convert all or any portion of
the unpaid principal balance of the promissory note into that number of
warrants, at a price of $1.00 per warrant (the "Conversion Warrants"). The
Conversion Warrants shall be identical to the warrants issued by us to the
Sponsor in the Private Placement upon consummation of the IPO, including as to
exercise price, exercisability and exercise period. As of September 30, 2022, we
have drawn down the promissory note in full.
On June 15, 2022, we issued one promissory note in the principal amount of up to
$300,000 to the Sponsor. The note bears no interest and is due and payable upon
the earlier to occur of (i) the date on which we consummate the initial Business
Combination and (ii) the date that the winding up is effective. At the Sponsor's
option, at any time prior to payment in full of the principal balance of the
promissory note, the Sponsor may elect to convert all or any portion of the
unpaid principal balance of the promissory note into that number of warrants, at
a price of $1.00 per warrant (the "Conversion Warrants"). The Conversion
Warrants shall be identical to the warrants issued by us to the Sponsor in the
Private Placement upon consummation of the IPO, including as to exercise price,
exercisability and exercise period. As of September 30, 2022, we have drawn down
$215,000 of the promissory note.
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On September 27, 2022, pursuant to the trust agreement dated as of February 8,
2021 between us and Continental, the trustee of the Trust Account, we issued a
request to Continental to withdraw $221,271 of interest income from the Trust
Account for the payment of our taxes. The proceeds from this withdrawal were
deposited into our operating bank account on September 28, 2022.
On October 27, 2022, stockholders holding 16,441,812 shares of common stock
exercised their right to redeem such shares for a pro rata portion of the funds
in the Company's Trust Account. As a result, $165,347,999 (approximately $10.05
per share) will be removed from the Trust Account to pay such holders.
As of a result of the approval of the Extension Amendment, the Sponsor has
agreed to contribute to the Company a Charter Extension Loan of $50,000 per
month, for each calendar month (commencing on November 8, 2022 and on the 8th
day of each subsequent month) until the Extended Date, or portion thereof, that
is needed to complete an initial Business Combination, for up to an aggregate of
$300,000. Each Charter Extension Loan will be deposited in the Trust Account
within five (5) business days from the beginning of such calendar month (or
portion thereof).
We anticipate that the $21,078 outside of the Trust Account as of September 30,
2022, will not be sufficient to allow us to operate through May 8, 2023, the
scheduled liquidation date of the Company if it does not complete a Business
Combination prior to such date. Until consummation of the Business Combination,
we will be using the funds not held in the Trust Account, and any additional
Working Capital Loans, for identifying and evaluating prospective acquisition
candidates, performing business due diligence on prospective target businesses,
traveling to and from the offices, plants or similar locations of prospective
target businesses, reviewing corporate documents and material agreements of
prospective target businesses, selecting the target business to acquire and
structuring, negotiating and consummating the Business Combination.
We believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. We will need to raise
additional capital through loans from our Sponsor, officers, directors, or third
parties. None of the Sponsor, officers or directors are under any obligation to
advance funds to, or to invest in, us. If we are unable to raise additional
capital, we may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, curtailing operations,
suspending the pursuit of our business plan, and reducing overhead expenses. We
cannot provide any assurance that new financing will be available to us on
commercially acceptable terms, if at all.
In connection with our assessment of going concern considerations in accordance
with FASB's Accounting Standards Update ("ASU") 2014-15, "Disclosures of
Uncertainties about an Entity's Ability to Continue as a Going Concern,"
management also determined that the liquidity condition and date for mandatory
liquidation and dissolution raise substantial doubt about our ability to
continue as a going concern through May 8, 2023, the scheduled liquidation date
if we do not complete a Business Combination prior to such date. These condensed
financial statements do not include any adjustments relating to the recovery of
the recorded assets or the classification of the liabilities that might be
necessary should we be unable to continue as a going concern.
These conditions raise substantial doubt about our ability to continue as a
going concern for the next twelve months from the issuance date of these
financial statements. Management plans to address this uncertainty through loans
from our Sponsor, officers, directors, or third parties, and the consummation of
a Business Combination before May 8, 2023. None of the Sponsor, officers or
directors are under any obligation to advance funds to, or to invest in, us.
There is no assurance that our plans to raise capital or to consummate a
Business Combination will be successful. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Critical Accounting Policies and Estimates
The preparation of the unaudited condensed financial statements in conformity
with US GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the unaudited condensed financial
statements and the reported amounts of expenses during the reporting period.
Actual results could differ from those estimates. We have identified the
following as our critical accounting policies:
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Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments
are derivatives or contain features that qualify as embedded derivatives in
accordance with ASC Topic 815, "Derivatives and Hedging". Derivative instruments
are recorded at fair value on the grant date and re-valued at each reporting
date, with changes in the fair value reported in the statements of operations.
Derivative assets and liabilities are classified on the balance sheet as current
or non-current based on whether or not net-cash settlement or conversion of the
instrument could be required within 12 months of the balance sheet date. The
Company has determined the private placement warrants are a derivative
liability.
Convertible Promissory Notes
The Company accounts for its convertible promissory notes under ASC 815,
Derivatives and Hedging ("ASC 815"). Under 815-15-25, the election can be made
at the inception of a financial instrument to account for the instrument under
the fair value option under ASC 825, Financial Instruments ("ASC 825"). The
Company has made such election for its convertible promissory notes. Using the
fair value option, the convertible promissory notes are required to be recorded
at its initial fair value on the date of issuance, and each balance sheet date
thereafter. Differences between the face value of the convertible promissory
notes and fair value at issuance are recognized as either an expense in the
statements of operations (if issued at a premium) or as a capital contribution
(if issued at a discount). Any material changes in the estimated fair value of
the convertible promissory notes are recognized as non-cash gains or losses in
the condensed statements of operations.
Common Stock Subject to Possible Redemption
All of the 17,250,000 Class A common stock sold as part of the Units in the IPO
contain a redemption feature which allows for the redemption of such public
shares in connection with the Company's liquidation, if there is a stockholder
vote or tender offer in connection with the Business Combination and in
connection with certain amendments to the Company's amended and restated
certificate of incorporation. In accordance with SEC and its staff's guidance on
redeemable equity instruments, which has been codified 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.
Therefore, all Class A common stock has been classified outside of permanent
equity.
The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of redeemable common stock to equal the redemption
value at the end of each reporting period. Increases or decreases in the
carrying amount of redeemable common stock are affected by charges against
additional paid in capital and accumulated deficit.
Net (Loss) Income Per Common Stock
Earnings and losses are shared pro rata between the redeemable shares and
non-redeemable shares. The 13,275,000 potential common stock for outstanding
warrants to purchase the Company's shares were excluded from diluted earnings
per share for the three and nine months ended September 30, 2022 and 2021
because the warrants are contingently exercisable, and the contingencies have
not yet been met. As a result, diluted net (loss) income per common stock is the
same as basic net (loss) income per common stock for the periods
Commitments and Contractual Obligations
Underwriting Agreement
The underwriters had a 45-day option from February 11, 2021 to purchase up to an
aggregate of 2,250,000 additional Units to cover over-allotments, if any. On
February 22, 2021, the underwriters purchased an additional 2,250,000 units to
exercise its over-allotment option in full. The proceeds of $22,500,000 from the
over-allotment was deposited in the Trust Account after deducting the cash
underwriting discounts.
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The underwriters are entitled to a cash underwriting discount of 2% of the gross
proceeds of the IPO, or $3,450,000 since the underwriters' over-allotment was
exercised in full, $250,000 of which will be deferred underwriting discount,
upon the completion of the Company's initial Business Combination subject to the
terms of the underwriting agreement. Additionally, if the Company consummates
its initial business combination, the underwriter is entitled to a cash fee for
its services in relation thereto in an aggregate amount equal to up to 3.5% of
the total gross proceeds raised in such offering.
Administrative Service Fee
Commencing on February 8, 2021, the Company will make a payment of a monthly fee
of $10,000 to the Sponsor or an affiliate thereof for administrative services
including office space, utilities and secretarial support provided to the
Company. Upon completion of the initial Business Combination or the Company's
liquidation, the Company will cease paying these monthly fees. During the three
and nine months ended September 30, 2022, the Company incurred and paid $30,000
and $90,000 administrative service fees, respectively. During the three and nine
months ended September 30, 2021, the Company incurred $30,000 and
$80,000 administrative service fees, respectively.
Off-Balance Sheet Arrangements
As of September 30,2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain
reporting requirements for qualifying public companies. We will qualify as an
"emerging growth company" and under the JOBS Act will be 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, our
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
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 independent registered public accounting firm'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 report of the independent registered public
accounting firm 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 CEO's compensation
to median employee compensation. These exemptions will apply for a period of
five years following the completion of this offering or until we are no longer
an "emerging growth company," whichever is earlier.
Factors That May Adversely Affect our Results of Operations
Our results of operations and our ability to complete an initial business
combination may be adversely affected by various factors that could cause
economic uncertainty and volatility in the financial markets, many of which are
beyond our control. Our business could be impacted by, among other things,
downturns in the financial markets or in economic conditions, increases in oil
prices, inflation, increases in interest rates, supply chain disruptions,
declines in consumer confidence and spending, the ongoing effects of the
COVID-19 pandemic, including resurgences and the emergence of new variants, and
geopolitical instability, such as the military conflict in Ukraine. We cannot at
this time fully predict the likelihood of one or more of the above events, their
duration or magnitude or the extent to which they may negatively impact our
business and our ability to complete an initial business combination.
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